What increases innovation capability and general performance in organisations: New research

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An interesting and fairly large- scale study has just been published in the Chinese Language Journal of Quality that conducts a form of factor analysis called Structural Equation Modelling (SEM) on data from 398 organisations.

The study looked at the level of influence the following factors have on each other:

  1. Organisational culture
  2. Leadership style and
  3. Organisational learning,

and how they affect innovation capability and performance within organisations.


The study found that:

  1. The culture of an organisation significantly impacts on and predicts its performance.
  2. The culture of an organisation has a positive impact on performance when it promotes and rewards innovation and creativity.
  3. Leadership style has no direct impact on an organisation’s innovation capability.
  4. There is a significant link between the ability of the organisation to learn and unlearn (reversal learning) and its performance.
  5. That the link between an organisation’s ability to learn and unlearn and the performance of the organisation is strongly associated with its innovation capability.

Close connections

In effect what this study is showing are the close connections between having a learning culture, a concern with creativity and innovation capability and the performance of the organisation. This is strongly suggesting that efforts to promote and develop a learning (and unlearning) culture and develop innovation capability will enhance the performance of the organisation.

Learning cultures

So what are we talking about by a learning culture and innovation capability?

A learning culture is one where there is an alignment between the organisation’s values (both the espoused values and the values in action), its conventions, processes, systems and practices that genuinely aspire to increase its own current knowledge, ability and performance. This means that it is adapting to change through learning and has the ability to recognise and shift knowledge and practice that is no longer relevant (reversal learning or unlearning).


Papers published in the Journal of Technology Management and Innovation in 2012 and the Journal of Economics, Finance, and Administrative Science in 2013 argued that innovation within an organisation occurs in four different areas, all of which need to be addressed to develop an innovation culture:

  1. Technological development
  2. Operations innovation
  3. Management development and learning and what is known as
  4. Transaction capability.

Transaction capability

Transaction capability is defined as a range of abilities, processes, experiences, skills, knowledge and routines that the organisation uses to increase its efficiency and reduce waste.

Going back a moment, people are often surprised that leadership style doesn’t predict outcome in studies like this. There are an increasing number of studies suggesting this, however when you look closely you often find, as in this study, that there are three issues.

  1. The first is that the studies are looking for a direct impact of the leadership style on something like organisational performance; they rarely look at indirect effects. A significant number of studies now show that there is no direct impact of leadership style. This does not take into account the actual decisions made.
  2. The second issue is that rarely do organisations encapsulate just one leadership style. Usually there are as many styles as there are departments so it is almost impossible to ascribe one style to the performance of an organisation, so it is not really surprising that no such correlations are discovered.
  3. Lastly leadership style is rarely fixed. People tend to lead in different ways in different situations where there aredifferent levels of stress and pressure, and levels of uncertainty for example.

The main point of this paper, for me, is that a genuine learning culture and an emphasis on innovation is linked to enhanced organisational performance.
Another unrelated paper just published (January 2016) found that there is a positive and strong correlation between having in a genuine learning culture and job satisfaction.


Tang, L.L. and Yeh, Y.L., 2015. Effect of Organizational Culture, Leadership Style, and Organizational Learning on Organizational Innovation in the Public Sector. 品質學報, 22(5), pp.461-481. Link to Paper: http://www.airitilibrary.com/Pu blication/alDetailedMesh?doci d=10220690-201510- 201510290025- 201510290025-461-481

Supporting Papers

Muda, A.L., Fook, C.Y. and Noordin, N.M., 2016. The Relationship Between Learning Culture and High Performance and Productivity Culture with Job Satisfaction: In 7th International Conference on University Learning and Teaching (InCULT 2014) Proceedings (pp. 17-25). Springer Singapore.

Tello Gamarra, J.E. and Zawislak, P.A., 2013. Transactional capability: Innovation’s missing link. Journal of Economics, Finance & Administrative Science, 18(34).

Zawislak, P.A., Cherubini Alves, A., Tello-Gamarra, J., Barbieux, D. and Reichert, F.M., 2012. Innovation capability: from technology development to transaction capability. Journal of technology management & innovation, 7(2), pp.14-27.

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