Determinants of Organizational Innovation: The Case of Portuguese Firms

Determinants of Organizational Innovation: The Case of Portuguese Firms

Miguel Torres Preto, Juelma Guerreiro
DOI: 10.4018/978-1-4666-8216-0.ch020
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The aim of this chapter is to examine the determinants of organizational innovation. To study the relationship and influence that the determinants have on organizational innovation the authors use data from CIS 4 for Portugal. The results of the logit model indicate that firm size, geographic scope, patents, process innovation, product innovation, R&D, internal source, market source and institutional source positively affect the propensity to introduce organizational innovation. Furthermore, the services are more likely to introduce organizational innovation than manufacturing firms. The results also support the argument that organizational innovation expands the development of product innovation and process innovation, promotes the increase of productivity and economic growth, and is a driver of competitive advantage.
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Innovation is the key to economic growth and the main source of competitive advantage (Wolfe, 1994; Yamin et al., 1997; Evangelista et al., 1997; Hage, 1999; Ravichandran, 1999; Fagerberg & Godinho, 2003; OECD/Eurostat, 2005; Damanpour & Wischnevsky, 2006; Johannessen, 2008; Lam, 2011; Ganter & Hecker, 2013), it is important for the continuity of society and business in all sectors of economic activity (Evangelista et al., 1997; OECD/Eurostat, 2005; Khan et al., 2009), and it has undergone significant changes over time (Yamin et al., 1997; Fagerberg, 2003; Bruland & Mowery, 2004).

According with OECD, innovation is divided into four types: product innovation, process innovation, marketing innovation and organizational innovation (OECD/Eurostat, 2005).

In the current economic context, where firms face more challenges, organizational innovation stands out due to its objectives as cost reduction and performance improvement in comparison with the introduction of a new product and/or process, which requires large and immediate investments with distant financial returns (Faria & Mendonça, 2011). Organizational innovation is considered in the literature as a necessary condition for organizations to adapt to new contexts resulting from external transformations, and it still works as vehicle to facilitate the development of technological innovation, it effectively being decisive for the sustainable development of societies (Lam, 2004).

The present study aims to identify and analyze:

  • 1.

    The determinants of organizational innovation, and

  • 2.

    The influence of those determinants with intensity of organizational innovation.

We analyzed the determinants derived from the organizational context (firm size, patents, and technological innovation), sources of knowledge and the competitive environment (geographic scope). This study also comprehends the relationship between organizational innovation and firm performance.

To achieve these objectives, research hypotheses were tested based on a quantitative approach, using econometric models, logit and ordered logit.

Beyond this section, this article is divided into five sections: Literature review and hypotheses; Data and methodology; Results; and Conclusions, limitations and suggestions for future study.


Literature Review And Hypotheses

Organizational innovation is a driver to create interest in many areas, where economics and management are the most evident examples. This type of innovation has a wide and diverse literature, however, is still an issue in development, inconsistent and inconclusive (Wolfe, 1994; Lam, 2004). There is not a clear definition and a way to directly measure their results (Yamin et al., 1997; Lynch, 2007; Lam, 2011). Wolfe (1994) argues that there can be no single theory to explain the general organizational innovation, in view of its extensive complexity, thereby increasing the difficulty of studying this concept.

Key Terms in this Chapter

Business Practice: Implementation of new methods for organizing routines and procedures, such as establishing databases of best practice, improving employee retention, or introducing management systems.

External Relations: The implementation of new ways of organizing relationships with firms or public institutions, such as collaboration with research organizations or customers, methods for integration with suppliers, or outsourcing.

Organizational Innovation: Also known as non-technological innovation is the implementation of a new organizational method in the firm business practice, workspace organization or external relations.

Workspace Organization: Implementations of new methods for distribution of responsibilities and decision-making among employees for division of work,as well as new concepts for the structuring of activity.

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