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cEmpirical Study on the Relationships between Climate for Innovation and Business Performance Outcomes in Design Firms
Kriengsak Panuwatwanich, Rodney Stewart and Sherif Mohamed Griffith School of Engineering, Griffith University Gold Coast Campus, Queensland 4222, Australia Email: k.panuwatwanich@griffith.edu.au Abstract: Innovation has been widely regarded as a determinant of a firm’s businessperformance. This paper reports on a study of “climate for innovation”, which plays an important role in driving a firm’s diffusion of innovation. Three major constructs underlying climate for innovation – organisational culture, leadership and team climate – are examined. A conceptual model was developed to study the relationships between such constructs and their effects on innovation diffusionoutcomes, which can, in turn, influence business performance. Quantitatively, the model was assessed using Structural Equation Modelling (SEM) technique, based on the data collected from a survey of Australian Architecture and Engineering Design (AED) firms. The final model derived from the analysis indicates that leadership is a key predictor of innovation diffusion outcomes, functioningindirectly through team climate and organisational culture. More importantly, the outcomes of innovation diffusion were found to predict business performance, thus highlighting the benefits of design innovation in AED firms. Finally, the model was validated through explanatory case studies of two Australian design firms using pattern matching analysis. Keywords: Business performance, Climate forinnovation, Design firms, Innovation diffusion 1. Introduction Innovation has been widely acknowledged as an important ingredient for firm’s competitiveness and economic growth. To successfully developing or implementing innovation, firms need to be able to understand how such innovation can be effectively diffused. Many scholars view innovation as a product of complex social interactions amongst membersof a social system and have concluded that innovation and the process of diffusion are results of a social psychological process (Egbu et al., 1998; Rogers, 2003). Invariably, such a process manifests itself in the form of “climate” in an organisation, which is considered as a determinant of motivation and behaviour (Kozlowski and Doherty, 1989). Climate is defined as “a shared and enduring molarperception of the psychologically important aspects of the work environment” (Ashfort, 1985). To study climate in an organisation, Schneider and Reichers (1983) contend that researchers should focus on a specific facet of climate in order to deliver meaningful results. The study presented in this paper thus concentrates on the social psychological factors that constitute “climate for innovation”.In addition, the study focuses on “design” as a context under which the climate for innovation was studied. According to Salter and Torbett (2003) design has long been recognised as an important part of the innovation process, yet it is poorly understood in innovation studies. Therefore, the study aims to address this gap by investigating the role of climate for innovation among AED firms.

Thepaper begins with the introduction of the development of a conceptual model, which depicts the relations among key constructs within the climate for innovation and their role on the diffusion of innovation and business performance. Each model construct and the rationale behind its development are delineated. A series of quantitative and qualitative analyses performed in relation to assessing thedeveloped model are then presented. Finally, the paper ends with the discussion and conclusions of the research findings. 2. Conceptual Model Development Extensive literature review regarding organisational creativity and innovation was conducted in order to explore factors that contribute to successful innovation and effective diffusion of innovation. As a result, three levels of social...