Personal Interaction Drives Innovation: Instrumental Guanxi-Based Knowledge Café Approach

Personal Interaction Drives Innovation: Instrumental Guanxi-Based Knowledge Café Approach

Muhammad Waseem Bari (Beijing Institute of Technology, China) and Meng Fanchen (Beijing Institute of Technology, China)
DOI: 10.4018/978-1-5225-2394-9.ch007
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Abstract

Based on knowledge sharing, transaction cost, and networking theories, the present study investigates the effects of instrumental guanxi-based physical knowledge café (IGPKC) and instrumental guanxi-based virtual knowledge café (IGVKC) on innovation capabilities. Relational psychological contract (RPC) acts as a mediator between IGPKC & IGVKC and innovation capabilities. Present study surveys 210 employees of software development Chinese firms and analyzes results through PLS-SEM. This study finds IGPKC and IGVKC have a significant effect on innovation capabilities and RPC partially mediates this effect. Through importance-performance matrix analysis (IPMA), it establishes that IGVKC has high importance but less performance than IGPKC and RPC for innovation capabilities. Thus, management needs to enhance the performance of IGVKC by following the trust commitment theory. The present study has implications for Chinese organizations to enhance their innovation capabilities and for the Chinese government to promote knowledge base economy with low transaction cost.
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Introduction

Innovation capabilities play a significant role to enhance organization performance and sustain its competitive advantage. Organizations’ resources and effective utilization of these resources determines the innovation capabilities of organizations (Sanchez-Famoso, Maseda, & Iturralde, 2014). The idea generation from existing codified and explicit knowledge and its application for innovative products is usually known as incremental innovation capabilities (Castiaux, 2007). In contrast, ideas’ mining from tacit knowledge repositories is probably a clue to radical innovation capabilities (Nonaka, 1994; Pérez-Luño, Cabello Medina, Carmona Lavado, & Cuevas Rodríguez, 2011). Organizations through radical innovation capabilities get the monopolistic control over current/new markets (Zhou & Li, 2012) whereas incremental innovation capabilities help them to maintain their competitive advantage in current markets (Pérez-Luño et al., 2011).

Several authors explain that guanxi (relationship) networks help organizations to get information and other resources that can be used to increase their innovation capabilities and sustain their competitive advantage (Chung, Yang, & Huang, 2015;Li, Zhou, & Shao, 2009;Wang & Chung, 2013). Guanxi is an eastern term while social capital belongs to the west and both are reciprocally referred to social networking (Huang & Aaltio, 2014). There are three dimensions of guanxi (Socio- affective, Instrumental, Mixed) with reference to nature and purposes of interaction among people (Hwang, 1987). In this study, we are focusing on instrumental guanxi as a source of innovation. Instrumental guanxi refers to the exchange of resources among backward and forward integrated organizations (for goods and services) to satisfy their mutual materialistic needs (Chen & Chen, 2004).

Instrumental guanxi-based networks at the organization and individual levels can be a source of reliable market information, new ideas and innovative knowledge. Knowledge sharing and transference among organizations increase the level of organizational learning, innovative capabilities and mutual collaboration (Nielsen, 2005; Pérez-Luño et al., 2011; Tsai, 2001). An instrumental guanxi-base structured network can provide the opportunities for knowledge creation, sharing, and transference. Nonaka & Konno, (1998) used a Japanese term “ba” that refers to a shared place where activities of knowledge creation and its management are performed. They further explained that “ba” can be a physical (single place) and/or a virtual place (e-mail, social media or video conferencing). David Gurteen refines the concept of “ba” with the idea of “Knowledge Café” (KC) (Gurteen, 2012). KC refers to a place where group/groups of individuals come together and discuss their alike interests, ideas, problems and their solutions (Lefika & Mearns, 2015). An instrumental guanxi-based knowledge café (IGKC) may provide the opportunities for the organizations to improve their learning and innovation capabilities.

Key Terms in this Chapter

Redial Innovation Capabilities: The abilities to introduce innovation in existing/new products: services, technologies, methods, and operational systems with revolutionary modifications.

Physical Knowledge Café: Physical Knowledge café denotes to a common place where individuals/organizations of alike interests come to gather physically for the sake of innovative ideas exchange and discussion on their different problems with possible solutions.

Relational Psychological Contract: The relational psychological contract refers to reciprocal promises among individuals based on utmost trust and implicit emotional attachment. Traditionally, in literature psychological contract consists of employer and employees.

Virtual Knowledge Café: Virtual Knowledge café refers to a virtual platform (Video conferencing: Social media websites, audio & video calling, and e-mails) where individuals/organizations of alike interests come to gather virtually for the sake of innovative ideas exchange and discussion on their different problems with possible solutions. Virtual knowledge café has a broader scope than physical knowledge café.

Incremental Innovation Capabilities: The abilities to introduce innovation in existing products: services, technologies, methods, and operational systems with slight improvements/ upgradations.

Guanxi: Guanxi is a Chinese term which refers to “Social relations”. Guanxi can be at the individual, family, and corporate level. The paradigm of Guanxi is near to the concept of social capital.

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