Organizational Attributes, Market Growth, and Product Innovation

Extensive research has shown that organizational attributes affect product innovation. Extending this literature, this article delimits two general categories of organizational attributes and relates them to product innovation. Organizational attributes can be either control oriented or flexibility oriented. Control-oriented organizational attributes strive to realize organizational activities as intended, while flexibility-oriented attributes allow organizational activities to emerge in a directed way. The classical institutional theory suggests that organizational attributes, no matter whether they are control oriented or flexibility oriented, serve two major functions: a constraining function and an enabling function. Recognizing the dual functions of organizational attributes, this article argues that both types of organizational attributes are indispensable for the functioning of innovative organizations and that the impacts of control-oriented organizational attributes on product innovation decrease with market growth, while the impacts of flexibility-oriented organizational attributes on product innovation increase with market growth. Empirical results largely support these hypotheses. Strategic planning, as a control-oriented organizational attribute, is positively associated with product innovativeness, regardless of the market growth rate. The effectiveness of other organizational attributes, including formalization and organizational redundancy, varies with market conditions. As the rate of market growth increases, formalization becomes less effective for, but never becomes detrimental to, product innovativeness. Conversely, as the rate of market growth increases, organizational redundancy becomes more effective for product innovativeness. Overall, the results show that both control-oriented and flexibility-oriented elements are indispensable for the design of innovative organizations.