Accepted Manuscript

Organizational climate for innovation and organizational

performance: The mediating effect of innovative work behavior

Roy Shanker, Ramudu Bhanugopan, B.I.J.M. van der Heijden,

Mark Farrell

PII: S0001-8791(17)30014-3
DOI: doi: 10.1016/j.jvb.2017.02.004
Reference: YJVBE 3050
To appear in: Journal of Vocational Behavior
Received date: 11 April 2016
Revised date: 13 February 2017
Accepted date: 15 February 2017

Please cite this article as: Roy Shanker, Ramudu Bhanugopan, B.I.J.M. van der Heijden,
Mark Farrell , Organizational climate for innovation and organizational performance: The
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 ACCEPTED MANUSCRIPT

CLIMATE FOR INNOVATION AND ORGANIZATIONAL PERFORMANCE: THE

MEDIATING EFFECT OF INNOVATIVE WORK BEHAVIOR

Dr. Roy Shanker

School of Management and Marketing, Charles Sturt University, Wagga Wagga, Australia

Email: [email protected]

*Associate Professor Ramudu Bhanugopan

School of Management and Marketing, Charles Sturt University, Wagga Wagga, Australia

[email protected]

Professor B.I.J.M. van der Heijden (Beatrice)

Institute for Management Research, Radboud University, Nijmegen, the

Netherlands [email protected]

Professor Mark Farrell

Graduate School of Business and Law, RMIT University, Melbourne, Australia

[email protected]

*Corresponding author

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Organizational climate for innovation and organizational performance: The mediating

effect of innovative work behavior

Abstract

Despite a plethora of literature on organizational climate for innovation and the persuasive
arguments establishing its link to organizational performance, few studies hitherto have
explored innovative work behavior of managers. Specifically, limited attention has been paid
to explaining how organizations perceive the importance of stimulating innovative work
environments. Drawing from organizational climate theory, this study investigates the
mediating effects of innovative work behavior on the relationship between organizational
climate for innovation and organizational performance. Our findings from a survey of 202
managers working in Malaysian companies demonstrate that innovative work behavior plays
a mediating role in the relationship between organizational climate for innovation and
organizational performance. Implications of these findings and avenues for future research
are discussed.

Key words: Organizational climate for innovation, innovative work behavior, organizational
performance

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1. Introduction

Employee knowledge is crucial if organizations are to innovate and develop a competitive

advantage. It is therefore essential to know how to create an organizational climate that

cultivates innovation among employees (Deshpande and Farley, 2004; Nybakk and Jenssen,

2012; Patterson, Warr, and West, 2004). Isaksen and Ekvall (2010) noted that the deliberate

management of organizational climates supportive of innovation is a key challenge, for those

who lead and manage organizations. More specifically, France, Mott, and Wagner (2007)

assert that failing to innovate can place organizations at risk and thus potentially diminish

their ability to sustain or gain a competitive advantage. They argue that the challenge of being

competitive can be met if organizations recognize that their ability to innovate is inextricably

linked to the manner in which their leaders, people, climate, culture as well as structures

support innovation and creativity.

The internal environment supportive of innovation is referred to as ‘organizational

climate for innovation’ (OCI) and is crucial for organizations leveraging on innovativeness in

order to create a competitive advantage and to enhance performance (Kissi, Dainty, and Liu,

2012). Isaksen and Ekvall (2010) supported this position arguing that an OCI is one where

creativity and change are encouraged; asserting that a key aspect of managing for innovation

is creating the appropriate climate so that employees can share and build upon each other’s

ideas and suggestions.

On the other hand, according to Janssen (2000) ‘innovative work behavior’ (IWB)

consists of three interrelated behavioral tasks: (i) idea generation; (ii) idea promotion; and

(iii) idea realization. Janssen’s (2000) theoretical framework supports the ideas surrounding the

concept of ‘ideation leadership’ that Johnson (2005, p. 613) relates to the creative process

associated with generating, developing and communicating new ideas. Graham and Buchanan

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(2004, p. 54) concur with this view, describing ‘ideation’ as all stages of the thought cycle

associated with innovation, development and actualization.

Janssen (2000) noted that IWBs are ‘discretionary behaviors’ and as a rule are not

included in employees’ prescribed job description or explicitly defined roles (see also Organ,

1988). Therefore, their application cannot be assured. In the same vein, Ramamoorthy, Flood,

Slattery, and Sardessai (2005) supported this view and reported that these discretionary

behaviors are not recognized by an organization’s formal reward and recognition systems.

Importantly though, Ramamoorthy et al. (2005) concluded that tendencies to engage in these

extra-role behaviors can lead to enhanced team and organizational effectiveness and superior

performance.

Driven by the assumption that employees’ innovative work behavior contributes

positively to work outcomes, researchers such as Janssen (2000), Janssen, Van de Vliert and

West (2004), and Mumford, Scott, Gaddis, and Strange (2002) have devoted increasing

attention to organizational and individual factors that potentially promote innovative work

behavior. However, the relationship between OCI and IWB is still largely unexplored.

The impact of OCI that are strategically linked to organizational performance (OP)

have been identified by researchers such as Crespell and Hansen (2009), and Nybakk and

Jenssen (2012). Other scholars have pointed to how innovative work behavior can assist

organizations to gain competitive advantage and to enhance organizational performance (e.g.,

Janssen et al., 2004; Kanter; 1988; Oldham and Cummings, 1996; Scott and Bruce, 1994;

Yuan and Woodman, 2010; Shih and Susanto, 2011). However, their approaches lack an

underlying conceptual framework; and focus heavily on research examining the relationship

between OCI and OP.

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Our study makes a number of worthwhile contributions to theory and practice in organization

climate research. First, only a handful of studies have looked into the relationship between

OCI and IWB in general, our study will provide a new perspective of the relationship

between the constructs. De Jong and Den Hartog (2010) assert that although a positive

correlation between innovative climate and innovative work behaviour has strong face

validity, most empirical work explored climate’s effects on organisational and team level

innovations. Many studies (West & Anderson, 1996; Amabile et al., 1996; Nijhof,

Krabbendam & Looise, 2002) at the organisational and team level have shown a positive

effect of climate on innovation. However, empirical study of climate’s effects on individual

innovative behaviour has been limited. It is also important to note that the current theoretical

understanding of the consequences of organisational climate is based largely on studies

conducted in western settings, with little evidence from an Asian perspective (Sellgren,

Ekvall & Thomas 2008). Managers who understand how to positively impact the climate of

innovation and work behaviour supportive of innovativeness will create the most

opportunities for innovation in their organisations which, in turn, may enhance the

performance of organisations.

As employee innovative behavior is seen as a strategic foundation, this research fills

the void by testing a model that delineates the relationship between OCI and OP in the

context of IWB. Therefore, the objective of this study is to examine the mediating effects of

IWB, on the relationship between OCI and OP. We aim to investigate the indirect relationship

IWB has on OCI and OP. The paper is set out as follows: first, we provide the review of

literature on OCI, IWB and OP to develop our hypotheses. Secondly, we present the research

methods followed by the results. Finally, we conclude the paper with a discussion of the

findings, implications, limitations and directions for future research.

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2. Literature review and hypotheses development

2.1 Organizational climate for innovation and organizational performance

Innovation has been shown to be crucial to the success of an organization and

individual creativity and innovativeness to be key to organizational level innovation (DiLiello

and Houghton, 2006). Importantly, organizational climate can have a positive effect on

creativity and innovation in organizations (Amabile, Conti, Coon, Lazenby and Herron, 1996;

Cooper, Edgett, and Kleinschmidt 2004; Nybakk, Crespell, and Hansen, 2011). Management

needs to ensure that the organizational climate encourages, nurtures, and enhances individual

creativity (DiLiello and Houghton, 2006; Hunter, Bedell, and Mumford, 2007; Isaksen and

Lauer, 2002). . Employees who have innovative and creative potential are most likely to

practice innovation when they perceive strong organizational support (DiLiello and

Houghton, 2006). Furthermore, if organizations are able to develop an organizational climate

perceived as positive by individuals, this is more likely to result in higher levels of

motivation, commitment, and employee engagement, leading to improved OP.

Macey and Schneider (2008) posited that high states of employee engagement in

innovation led to discretionary effort of employees which, in turn, led to better OP. Further,

an organizational climate that motivates and involves employees has a positive impact on

performance (Brown and Leigh, (1996). Analogously, Harter, Schmidt, and Keyes (2002)

concluded from a meta-analysis of over 7,000 business units in 36 organizations that building

an environment that increases and supports employee innovation can significantly increase

the possibility of business success. Consistently these studies and several other exploratory

studies (e.g., Crespell and Hansen, 2009; Deshpande and Farley, 1999; King, De Chermont,

West, Dawson, and Hebl, 2007; Nybakk et al., 2011; Nybakk and Jenssen, 2012) have

suggested that climate for innovation exerts both direct and indirect effects, through

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innovative work behaviors, on organizational performance. Therefore, the following

hypothesis is tested:

Hypothesis 1: Organizational climate for innovation is positively related to organizational

performance.

2.2 Organizational climate for innovation and innovative work behavior

De Jong (2006), who carried out in-depth interviews with leaders in knowledge-

intensive service firms, suggested that innovation climate is an antecedent of IWB. West and

Rickards (1999) supported this notion in their research and reported that creative and

innovative behavior is promoted by a combination of both personal qualities and work

environment factors. Autonomy to act is another key issue in this regard, encompassing

personal control over how time is allocated and how work is carried out (Parzefall, Seeck,

and Leppanen, 2008). Importantly, Huhtala and Parzefall (2007), argues that in comparison to

routine work, non-routine tasks and jobs are more challenging, and thus require more thought

providing opportunities for learning and personal growth which, in turn, promotes

innovativeness.

Although a positive relationship between innovative climate and innovative work

behavior has strong face validity, most empirical work, completed thus far, has explored

organizational climate’s effects on organizational and team level innovations (De Jong and

Den Hartog, 2010). Studies at the organizational and team levels have shown a positive effect

of organizational climate on innovation (e.g., Amabile, et al., 1996; Nijhof, Krabbendam, and

Looise, 2002; West and Anderson, 1996). However, empirical studies of the effects of

organizational climate on individual innovative behavior have been scarce. Scott and Bruce

(1994) hypothesized that perceptions of organizational climate affected employee innovative

behavior, and found a positive yet rather weak relationship.

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Organizational climate dimensions such as autonomy and freedom, as well as the

introduction of specialized knowledge and information, appear to have a positive effect on

innovative behavior (Krause, 2007). Specifically, when individuals work in an environment

where freedom is perceived to exist, they may experience greater free-will and take greater

control of their own ideas and work processes, enhancing their innovativeness (Amabile et

al., 1996; Si and Wei, 2012). However, De Jong and Den Hartog (2007) did not find any

evidence to support a correlation between supportive innovation climate and IWB.

Although current literature provides little empirical evidence, there are reasons to

anticipate a positive relationship between perceptions of organizational climate and IWB. For

example, Albrecht and Hall (1991) observed that suggesting new ideas was perceived to be

risky because it represented change to an established order. New ideas invite evaluation by

other organizational members and may lead to debate or, even, to conflict. Thus where failure

is tolerated and fear of submitting an absurd idea does not exist, creativity is encouraged.

Similarly, Mikdashi (1999) argued that to find original solutions to problems requires

employees to have the freedom to break the rules. If synthesized, the themes linked to risk

taking, debate, freedom and trust which are all seen to impact on IWB, interestingly overlap

with the determinants of OCI strengthening the expectation that OCI is likely to have a

positive effect on IWB. It is, therefore, posited that:

Hypothesis 2: Organizational climate for innovation is positively related to innovative work

behavior.

2.3 Innovative work behavior and organizational performance

Organizations need to increase their flexibility, responsiveness and efficiency due to the

volatile nature of global business environment and the strong need to respond to challenges

faced by local and international competition (Dorenbosch, Van Engen, and Verhagen, 2005;

Reuvers, Van Engen, Vinkenburg, and Wilson-Evered (2008). This, by necessity, translates

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to a greater need for continuous innovation of products and services as well as internal

processes and behaviors. In addressing this concern, the prior research has shifted from views

of efficiency towards innovation. A need for more knowledge about how individual effort can

be coordinated, to affect innovativeness and performance at organizational levels has been

identified (Bilton and Cummings, 2010; Edwards, Delbridge, and Munday, 2005; Isaksen and

Tidd, 2006; Jung, Chow and Wu, 2003). In addition, Davila, Epstein and Shelton (2006)

argued that identifying gaps in implementing innovation should contribute to improve OP,

whilst Rubera and Kirca (2012) indicated that employees’ innovativeness indirectly affects

organizational value through its effects on market and financial positions. Nevertheless,

according to Morales et al. (2008), innovation is essential for improved OP and they show

that organizations which focus on prolific employees’ innovation are more successful at

securing a larger market share which can lead to high income and profitability. The theory of

resources and capabilities also claims that organizations need capabilities, resources and

technologies to implement a new innovation strategy that will be a challenge for competitors

to mimic, and that allows organizations to have sustainable competitive advantages and to

gain greater organizational performance (Bommer and Jalajas, 2004; Calantone, Cavusgil,

and Zhao, 2002; Lengnick-Hall, 1992). Therefore, we hypothesize Hypothesis 3: Innovative

work behavior is positively related to organizational performance. 2.4 The mediating effects

of innovative work behavior

The relationship of organizational climate to OP is mediated by individual employees’

work attitudes as demonstrated by a meta-analysis reported by (Parker, Baltes, Young, Huff,

Altmann, Lacost, and Roberts, 2003). Importantly, innovation derives from the efforts and

interaction of people within an organization, all employees must be involved in the

innovation process for it to succeed (Hartman, Tower, and Sebora, 1994). This view is

supported by De Jong and Den Hartog (2010) who argued that employees play an important

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part in the innovation process because their thoughts and actions are crucial for continuous

innovation and improvement in attaining better organizational profitability, growth, and

market value. Employees’ behavior then is likely to influence an organization’s operating

performance through the effective application of their knowledge and technological skills in

order to trigger innovative initiatives with the goal of enhancing their competitiveness. In

keeping with this line of thinking, we argue that there is indirect effect of IWB on the

relationship between OCI and OP Therefore, it can be hypothesized that:

Hypothesis 4: The relationship between organizational climate for innovation and

organizational performance is mediated by innovative work behavior.

3. Method

3.1 Sample and procedures

Data for this study were collected from managers working in public listed Malaysian

Companies. The population of this research consisted of those graded as managers in their

respective organisations (leaders with subordinates). Prior to the distribution of the

questionnaires, the Head of Human Resources (HR) of each company was approached and

notified of the aim of the study Instructions were given to the respective HR Heads on the

targeted population. English is the lingua franca in educational institutions and companies in

Malaysia. Therefore the language used in the questionnaire was English and a condition for

participation in the survey was an ability to communicate in English. A pilot test was first

carried out among 12 managers to ensure questions were understood and to account for any

cross-cultural invariance. The participants indicated that the items included in the survey

were lucid and easy to understand.

Of 530 surveys distributed, 218 responses were received, of which 202 were useable, (16

surveys were incomplete and therefore discarded) yielding a response rate of 38%. A number

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of reasons are attributed to the low response rate. First, the researchers’ inability to make

additional contact with units selected in a survey can be a significant main contributor to

nonresponse. Secondly, cultural background of the respondents and finally the company

policy and legal issues relating to disclosing information to the public. Nevertheless, Kline

(2005) recommended that a sample size in excess of 200 is suitable to effectively employ

Structural Equation Modelling (SEM). The gender of respondents was relatively even, with

56.4% being female (n = 114) and 43.6% being male (n = 88). Most respondents were

between the ages of 30 and 40 years (48.5%), followed by the 20 to 30 years age group

(28.2%), respondents between the ages of 40 and 50 accounted for 16.8% and those above

the age of 50, for 6.4%. The education level attained for the majority of respondents was a

bachelor degree: 66.3% (n = 134), followed by diploma holders: 17.8% (n = 36) and those

with post-graduate qualifications: 15.8% (n = 32). Finally, the respondents’ position in their

organisations showed that all were manager grade staff. In terms of years in service with their

organisations 34.6% (n = 70) had served for 10 to 20 years, 31.7% (n = 64) for 5 years or

less, 28.7% (n = 58) for 5 to 10 years and 5% (n = 10) had given 20 years of service. The

sample included six business sectors: 38.1% in the financial services/banking sector (n = 77),

19.3% in the manufacturing/industrial/engineering sector (n = 39), 18.3% in the

energy/utilities sector (n = 37), 11.9% in the construction sector (n = 24), 9.4% in the

agricultural sector (n = 19) and 3% in the service sector (n = 6).

3.2 Measures

OCI was measured by employing the English version of the Isaksen, Lauer and Ekvall (1999)

‘Situational Outlook Questionnaire’ (SOQ). It was based on the organizational climate model

developed by Ekvall (1983) and consisted of the following sub-scales: (i) challenge (8 items);

(ii) freedom (6 items); (iii) trust (3 items); (iv) idea time (6 items); (v) playfulness (6 items);

(vi) conflict (6 items); (vii) idea support (5 items); (viii) debate (6 items); and (ix) risk taking

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(4 items). In total, there were fifty questions covering the nine dimensions of the SOQ.

Managers were asked to indicate the perceived climate for innovation in their organization on

a four-point Likert scale. Each item is scored from ‘not at all applicable’ (0) to ‘applicable to

a high degree’ (3). The Cronbach α score for this scale was 0.92. IWB was measured by

employing Janssen’s (2000) scale that encompasses the three stages of innovation: (i) idea

generation (3 items), (ii) idea promotion (3 items) and (iii) idea realization (3 items). All

items were scored using a seven-point rating scale ranging from ‘never’ (1) to ‘always’ (7).

The Cronbach α score for this scale was 0.95.

Perceptions of OP were measured using an eleven-item scale of perceived operational

and market performance developed by Delaney and Huselid (1996). The dimension of

operational performance was composed of seven items covering product as well as people

(relationship) performance. The dimension of market performance was composed of four

items covering economic indicators. The measures were rated by asking the managers to

assess their organization’s performance relative to that of their key competitors. The

examples of the scale items were “satisfaction of customers or clients” (operational

performance) and “market share” (market performance). Items were assessed on a four-point

Likert-type scale ranging from ‘much worse than the competitors’ (1) to ‘much better than the

competitors’ (4). The Cronbach α score for this scale was 0.87. We controlled for participants’

age, gender, education, years in service, position and the type of business considering their

probable associations with OCI, IWB and OP.

3.3 Common Method Variance

As our study primarily looked at perceptions of employees in Malaysian organisations and

responses were self-reported, there might be an issue of the Common Method Variance

(CMV) (Lindell and Whitney, 2001).Podsakoff, MacKenzie, Jeong-Yeon, and Podsakoff

(2012) recommend that to reduce this potential bias some procedural and statistical remedies

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can be employed. In this study, the assurance of anonymity and confidentiality was provided.

Konrad and Linnehan (1995) support this process arguing that anonymity can help reduce

such bias even when responses relate to sensitive matter where personal characteristics are

assessed. Doty and Glick (1998) assert that validated scales are less sensitive to CMV.

Nevertheless, to address the CMV issue a number of statistical testes were employed

following the recommendation of Chang, van Witteloostuijn, and Eden (2010), First, using

Harman’s one-factor test (Podsakoff and Organ, 1986), all items associated with OCI, IWB,

and OP that were subjected to an EFA clearly revealed that common method bias was not a

major issue. Secondly, we employed CFA to further test the effect of CMV (Stam and Elfring,

2008). The three-factor model involving OCI, IWB and OP demonstrated fairly good fit to

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the data. Thirdly, a sequential χ difference test indicated that the one factor model was

significantly inferior to the three factor model showing CMV was not a potential problem in

this study.

3.4 Data Analytic Strategies

This research adopted the procedures proposed by Baron and Kenny (1986) for the test of

mediation; and a series of statistical analyses to test the hypotheses were employed. LISREL

9.1 was used to run a set of CFA models. To test hypotheses 1-3, a hierarchical regression

analysis on which we regressed IWB on OCI and OP was conducted. Importantly, to justify

the mediation effect in hypothesis 4, PROCESS macro developed by Hayes (2013) which

involves bootstrapping procedures and Sobel test (Sobel, 1982) was used.

4. Results

4.1 Descriptive statistics

Table 1 summarizes the means, standard deviations as well as the correlation matrices for all

of the variables. After establishing the factor structure for all variables, Confirmatory Factor

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Analysis (CFA) was employed to establish a valid measurement model prior to testing the

structural model and to confirm its validity. Hair, Black, Babin, Anderson and Tatham (2006)

suggested that to be considered as having an adequate fit, all the indices must be measured

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against the following criteria: χ /df < 3.00; GFI, CFI, and NFI > 0.90; and RMSEA < 0.08.

The result of the variance inflation factor (VIF) tests indicated that the largest VIF was less

than 2.72, which is below the accepted threshold of 5 (Neter, Kutner, and Nachtsheim, 1996).

Therefore, no significant multicollinearity found. To identify the outliers dfbetas were

examined and we found no standardized dfbetas greater than an absolute value of .72. Further

the leverage statistic (hat-value) found no leverage scores greater than .2 (Neter et al., 1996).

These results showed no outliers.

As recommended by Brown (2006) we employed exploratory factor analysis and

confirmatory factor analysis frameworks to examine the underlying factor structures and

internal consistency for the OCI, IWB and OP constructs. Exploratory factor analysis (EFA)

was employed to initially identify the number of underlying factors, including the pattern of

loadings. For the ‘OCI construct, 44 items from the original 50-items scale were retained.

The subsequent results in the pattern matrix showed nine clear factors and the total

cumulative variance was 74.7%. The factor loadings ranged from 0.403 to 0.987. These

factors were labeled as: (i) Trust; (ii) Freedom; (iii) Idea support; (iv) Risk Taking; (v)

Challenge; (vi) Conflict; (vii) Playfulness; (viii) Idea Time; and (ix) Debate. All factor

loadings (except for 2 items from the Challenge factor, 1 from the Ideas Support factor, 2

from the Freedom Factor; and 1 from the Trust factor) were above the acceptable threshold of

0.4. The latter items were dropped. All labels and items were consistent with that of the

original dimensions proposed by Isaksen et al. (1999). There were no factor correlations

above 0.7, hence, discriminant validity was deemed to be good. The overall scale indicated an

α = 0.92, which was above the acceptable threshold of 0.7 (Nunnally, 1978).

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The factor analytic results for IWB showed the KMO to be 0.902 with < 0.000

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significance. The Bartlett test of sphericity, χ = 1879.02, was significant at p < 0.000. The

subsequent results in the pattern matrix showed two clear factors and the total cumulative

variance was 81.7%. All factor loadings were above the acceptable threshold of 0.4. Thus, no

items were deleted and judgment was then made to retain two factors. The two factors which

were labeled as ‘Idea Actualization’ and ‘Idea Generation’. The results show good internal

consistency, with the overall scale α = 0.95.

Finally, for OP, the factor analytic results showed three factor loadings ranging from

0.462 to 0.978 and the total cumulative variance was 70.19%. All factor loadings except one

(OP 5, Customer satisfaction) were above the acceptable threshold of 0.4. This item was

subsequently dropped. As the factors differed from the original model proposed by Delaney

and Huselid (1996) each factor was re-labeled. The factor loadings and the three factors

which were labeled, (i) ‘Operational Performance: Product and Service’; (ii) ‘Market

Performance’; and (iii) ‘Operational Performance: People’. The results show good internal

consistency with α = 0.87 for the overall scale.

Prior to testing the identified hypotheses, Confirmatory Factor Analysis (CFA) was conducted

to establish convergent and discriminant validity of variables in our study, which follow the

recommendations advanced by Fornell and Larcker, (1981).The results in Table 2 show that

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the measurement model fitted the data better (χ [341] = 627.43, p < .01; CFI = .93, NNFI = .

92, SRMR = .07, RMSEA = .06) than the other three models, thus exhibiting good

psychometric properties. Furthermore, the factor loadings of the indicators in each of the

three variables were statistically significant (p < .05), a representation of a satisfactory

convergent validity (Anderson and Gerbing, 1988).Therefore, the three-factor model was

justified. The chi-square difference test indicated a significant difference (see Table 2) which

provided evidence for the satisfactory discriminant validity (Anderson and Gerbing, 1998).

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Based on the results; this research concludes that the measurement model demonstrated

satisfactory psychometric soundness.

4.2 Tests of hypotheses

To test hypotheses 1-4, hierarchical multiple regression analysis as recommended by Baron

and Kenny (1986) was employed. In general, four conditions must be fulfilled to evidence a

mediating effect. First, the independent variable must predict the dependent variable. Second,

the independent variable must have a significant relationship with the mediator. Third, the

mediator must have a significant influence on the dependent variable. Finally, the effect of

the independent variable on the dependent variable must be purged or significantly reduced

after the effect of the mediator has been taken into consideration.

Table 3 shows that controlling for demographic variables, OCI has a positive

significant relationship with OP (ß = 0.62 p < 0.05) lending support to H1 which fulfils the

first condition. The results reveal that OCI is positively related to IWB (ß = 0.54; p < 0.05)

which provide support for H2; and thus meets the second condition. The results also indicate

that IWB has a positive significant (ß = 0.39; p < 0.05) relationship with OP supporting H3

and thus fulfilling the third condition. Further, the results reveal that when OCI and IWB

were entered into the regression together, OCI no longer significantly influenced OP (ß =

0.29; n.s), while IWB had significant influence on OP indicating that IWB is fully mediating

the relationship between OCI and OP. Thus Hypothesis 4 was accepted and this result fulfils

the fourth condition.

Furthermore, we conducted Sobel test (Sobel, 1982) to find out whether the mediating

effect is significantly different from zero. The results of the Sobel test confirmed that the

association between OCI and OP is significantly mediated by IWB (z=1.98, p ≤.05).

Following Preacher and Hayes (2008), a bootstrap analysis was conducted to examine the indirect

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effects of OCI on OP through IWB, with 5000 resamples. The results are presented in Table 4.

Linear regression with maximum likelihood estimates and 95% bias corrected confidence intervals

(CI) to assess the indirect relationship between OCI on OP through IWB was also employed.

Controlling for gender, age, education and years of service the result indicate that (coeff = 0.33, CI =

[0.3721, 0.0121] excluding zero showed a significant indirect effect of OCI on OP through IWB.

When expressed as a proportion in which indirect effect/total effect * 100%, these results suggest that

IWB mediates 53 % of the total effect of OCI on OP. (Freedman, 2001; Sobel, 1982). Therefore, these

results provide support for Hypothesis 4.

5. Discussion

The study examined the influence of ‘organizational climate for innovation’ on

organizational performance mediated by ‘innovative work behavior’. We tested a model

delineating the relationship between OCI and OP mediated by IWB which yielded a number

of worthwhile results. The findings confirm that the relationship between OCI and OP was

significant. The results have revealed that OCI had a significant and positive impact on IWB.

This shows that the existence of an innovative culture plays a contributing role in enhancing

the IWB. Our findings support previous studies that have linked innovative behavior (e.g.,

Kissi et al., 2012; Krause, 2007). Krause (2007) maintains that employees are more likely to

engage in IWB when granted freedom and autonomy because it fosters the perception that

they are able to improve and control their work circumstances. Similarly, there is evidence

that important relationships exist between individual innovation and organizational climate

dimensions related to autonomy, freedom, feedback and challenging work (Amabile and

Gryskiewicz, 1989; Jaskyte and Audrone, 2006; Oldham and Cummings, 1996). Prior studies

reported little research relating to the influence of demographics factors on innovative work

behaviour and organisational climate for innovation. However, these variables were

examined separately.The findings of this study indicated that years in service and age

influence climate for innovation and innovative behaviour of the managers.

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Our findings are also in line with Isaksen and Ekvall (2010) who argue that the OCI is

related to how new ideas are treated or managed and ‘ideation leadership’ (Graham and

Buchanan 2004: Johnson, 2005). Leadership that provides OCI, encourages idea generation

where ideas are treated in a receptive way and appraised on their feasibility in a fair and

supportive way. This can potentially lead to individuals having greater willingness to try out

new ideas and practices. Mumford et al. (2002) also notes that such circumstances may create

the necessary time, as well as encourage calculated risks and slack which may translate to an

improved perception of idea support.

In addition, Odoardi, Battistelli and Montani (2010) note that if employees perceive

their work environment to be where their creative and innovative efforts are valued and

where their ideas are sincerely appreciated and accepted, they will be more willing or open to

accept goals related to innovation and thus engage in innovative behavior. Whilst Mumford et

al. (2002) further emphases that intellectual stimulation serves as a direct trigger in

generating ideas. Apart from such behavior; De Jong and Den Hartog (2007) indicate that this

also seems to stimulate reflection among employees. This outcome can enhance individual

innovativeness and also suggest that support for new ideas requires leaders who listen and

support such behavior as critical for the further development and implementation of these

ideas.

Another interesting finding of this study is that employees who exhibit IWB play a

contributing role in enhancing OP. This is in line with Amabile, (1988) and Woodman,

Sawyer, and Griffin, (1993) who argue that individual willingness is essential to

organizational innovation, which according to Kanter (1983) and Tushman and O’Reilly

(1996) leads to sustainable organizational success. The findings also accord with those who

assert that IWB is significant in facilitating competitive advantage (e.g., Janssen et al., 2004;

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Kanter, 1988; Oldham and Cummings, 1996; Scott and Bruce, 1994; Shih and Susanto 2011;

Yuan and Woodman, 2010).

Our findings are also consistent with the recent research in different cultural contexts

For example; Rahnama, Mousavian, Alaei and Maghvan (2011) have found a statistically

significant relationship between employee innovation and organizational effectiveness.

Whilst Vincent, Bharadwaj, and Challagalla (2004) assert that innovation is positively related

to superior employee performance and that it is a significant driver of OP. This findings

support De Jong and Den Hartog’s (2010) notion that behaviors involved in the

implementation of ideas and to achieve improvements in addition to idea generation are

important for enhancing personal and business performance. Our findings also extend the

work of Parker et al. (2003) that indicated the relationship of OCI with OP is mediated by

employees’ work attitudes.

Our results also corroborate the findings of Tidd and Bessant (2009), who highlighted

that support for ideas, is one of the major factors critical for an organizational climate that

fosters innovation. Finally, our findings suggest that support and space for ideas relates to the

amount of time employees are given be innovative. That is; when ideas support and

intellectual stimulation exists, the climate for innovation will be strong and provide dynamic

opportunities for employees to challenge prior assumptions, reframe problem areas and

pursue new ways of doing things, which can pave avenues for improving overall

organizational performance.

5.1 Theoretical contributions

Our study extends organizational innovation climate research and furthers understanding of

employees’ IWB and OP. Our study provides empirical support for previously inconsistently

tested assumptions that OCI affects OP mediated by IWB. This study contributes to the

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emergent debate on understanding why in the face of the common agreement on the

relationship between OCI an OP the mediating role of IWB was understated in the extant

research. This research raised an important issue, drawing from the domain of industrial and

organizational psychology and building on organizational climate theory; our findings

support the notion that an innovative climate is an important influence on employees’

innovative behavior. Our study also proposed a theoretical framework that identified OCI as a

positive predictor of individual IWB. From a theoretical perspective, the results shed light on

the inconsistent findings of De Jong and Den Hartog (2005) and Krause (2007) in regard to

the relationship between OCI and IWB. Additionally, the findings also align with those of

Kheng and Mahmood (2013) whose research identified a positive relationship between an

OCI and employees IWB but failed to consider the interaction with OP. Furthermore, we

make a significant contribution to the organizational climate literature (Joyce and

Slocum,1984; Senge,1990;Gelade and Ivery,2003; Kuenzi and Schminke,2009) by

demonstrating that managers who have the necessary capabilities to effectively utilize the

climate dimensions such as ‘idea support’; should be able to promote behaviors that are pro-

innovation. According to Odoardi, et al. (2010) the perception of ample support for idea

development and implementation as well as for the improvement of skills related to

innovation may enhance an individual’s confidence in their capability to stimulate and

maintain innovative work behaviors. To support IWB among employees, it is necessary to

focus on the OCI dimensions. In this context, our study contributes new knowledge to the

literature on organizational innovation by illustrating how various aspects of an OCI can be

operationalized and assessed, while showing how individual work behavior can be

influenced, potentially making climate and innovative behavior more explicit and easier to

attribute .

5.2 Implications for practice

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This research has important implications for managers who desire to strengthen or

develop a strong work climate for innovation to attain improved organizational performance.

As for those managers earmarked for more senior roles, they must be aware of issues that

need to be taken into consideration when there is a need to revitalize creativity and

innovation in their workplace. Potosky and Ramakrishna (2002) note the need to understand

that at the individual level, an individual’s workplace behavior is often influenced by their

perceived support from the immediate work environment. It is important for employees; as

West and Farr (1989) also point out, to feel safe in groups and at work so that they will not be

reluctant to derive and share new ideas.

Our findings have some interesting implications for practitioners who aim to build the

most effective organizational climate for enhancing individual innovativeness. The

organization’s human resources policies should be aligned with organizational goals for

innovation considering the perpetual outcomes. This could include introducing new structures

and systems where there is increased autonomy and developing recognition programs that

places importance on proactive behaviors linked to innovativeness. To create a suitable

environment for innovativeness to burgeon, organizations might look to coaching managers

to be more encouraging and supportive, and who will in turn, seek to strengthen team

dynamics where dimensions such as ‘idea sharing’ are inculcated and facilitated. Notably, our

results have laid an essential foundation through building on an organizational climate and

innovation framework by providing valuable insights into employee innovative behavior and

its role on organizational performance.

5.3 Limitations and Future Research

Though our research contributes to the growing literature on organization climate for

innovation, the findings should be viewed with caution as they are subject to a number of

limitations. First, the study is cross-sectional in nature. Without an experimental design and

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longitudinal data, conclusions regarding causality cannot be drawn. Secondly, responses on

IWB were obtained from the same source at the same time. Thirdly, the questionnaire

measured respondents’ perceptions of their organization’s performance relative to that of their

competitors. Organizational performance was conceptualized as perception based, rather than

economic data based. This was undertaken primarily because the economic indicators may

not have been consistent sources of information, as some employees may not have had direct

access to financial records or other numerical performance indicators. Although it is practical,

and there is empirical support for the use of subjective perception of employees as a basis of

evaluating organizational performance (Boga and Ensari, 2009) and previous studies have

shown strong links between subjective and objective measures of operational performance

(Dess and Robinson, 1984), this dependence is still one area for potential improvement. The

use of additional measures, objective in nature, also has the potential to add credence to the

reported findings. Additional limitation arise as organizational climate is assessed on the

basis of the perceptions of one person which may not be an accurate reflection.

This study focused on government companies in a Malaysian setting. To improve the

generalizability, especially in a broader Asian context, studies could be replicated in other

geographical area and countries in the region. Similarly, studies carried out in private entities,

as well as the public sector, may also provide richer and comparative data for analysis. Thus,

it would be beneficial to replicate this study in varied industries and across a wider population

to reaffirm the conclusions made in this study. In addition; qualitative research using open-

ended interviews may be an appropriate approach to use for further exploration. Research that

employs mixed methods whereby both qualitative and quantitative methodologies associated

with constructivism and positivism are applied, has the potential to offer richer analysis.

Finally, future studies should be based on larger sample sizes, this can

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permit more powerful analysis. It may also prove interesting to study similar characteristics

with data provided by lower levels of management and employees in the organization.

This study examined the direct relationship between OCI and IWB. However, the relationship

between an innovative working climate and individual level innovativeness might be more

multifaceted than suggested in this study. The climate may influence innovative work

behavior through individual level mediators. Thus to examine this impact, it would be logical

to raise questions on this issue and include potential mediators, such as employee engagement

or intrinsic motivation (Amabile et al., 1996; Carmeli and Spreitzer, 2009; Yuan and

Woodman, 2010). The findings also provide a theoretical framework that helps to identify

IWB as a positive predictor of OP. Further, the results align with recent work (e.g., Janssen et

al., 2004; Shih and Susanto, 2011) which concluded that IWB has a positive and significant

impact on OP and creates a competitive advantage. The relationship between the two

constructs may be more intricate since innovative behavior in individuals may directly affect

OP positively, or it may influence other behavioral elements which in turn, influence

performance. In the light of the limitations, this study calls attention to researchers to extend

the level of our understanding on the climate that foster the acquisition and exploitation of

diverse innovation knowledge.

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342.

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Table 1 Means, Standard Deviations and Zero-Order Correlations

Variables Mean SD 1 2 3 4 5 6
1. Years in service 9.54 5.56
2. Age 2.03 0.85 .74**
3. Gender 1.57 0.50 -0.07 -0.06
4. Education 2.99 0.60 -0.28 -0.09 -0.09
5. Climate for Innovation 1.51 0.36 ** ** 0.02 -0.05
.19 .37
6. Innovative Work Behavior 3.66 1.14 .18* .24** 0.02 -0.10 .52**
7. Organizational Performance 2.70 0.48 0.04 0.00 0.08 -0.12 .53** .38**
**. Correlation is significant at the 0.01 level
*. Correlation is significant at the 0.05 level
Year of Service is a dummy variable (< 10 years =0;>10 years=1)
Age is a dummy variable (<40 years old=0; >40 years old=1)
Gender is a dummy variable (Female=0; Male=1)
Education is a dummy variable (Undergraduate=0; post graduate=1)

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Table 2 Full measurement model comparisons

Models df CFI NFI RMSEA SRMR

Baseline model
(Three factors) 2154.13 204 0.93 0.92 0.068 0.073
Model A (two factors combines OCI and OP into one factor) a 1279.67 211 199.17 4*** 0.89 0.87 0.073 0.088

Model B (two factors combines OCI and IWB into one factor) b 1183.61 323 35.71 2*** 0.86 0.86 0.075 0.121

Model C (two factors combines IWB and OP into one factor) b 726.91 346 56.70 2*** 0.86 0.84 0.076 0.122

Model D (Harman’s single factor model)c 992.46 379 265.55 8*** 0.72 0.79 0.098 0.136

Notes: N = 202, *p < 0.5; **p < 0.01, ***p < 0.001; x² = chi-square discrepancy, df = degrees of freedom; CFI = comparative fit index; NFI =
normed fit index; RMSEA = root mean square error of approximation; SRMR = standardised root mean square residual; χ2 = difference in chi-
square, df diff = difference in degrees of freedom.

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Table 3 Hierarchical Regression Results

Variables IWB Organizational Performance

Model 1 Model 2 Model 3 Model 4

Control Variables
Position 0.16 0.05 0.01 0.06

Gender 0.02 0.08 0.06 0.05

Age -0.19 -0.14 -0.34** -0.33**

Education 0.06 -0.07 -0.05 -0.04

Experience 0.15 0.10 0.20* 0.17

Industry 0.03 0.10 0.03 -0.03

Independent variable

Organizational Climate for Innovation 0.54** 0.62** 0.29

Mediator

Innovative work Behavior 0.39** 0.15*

R2 0.32** 0.33** 0.36** 0.37**

Adj R2 0.39** 0.30** 0.34** 0.41**

F value (Sig. Level) 6.11** 2.92** 4.89** 5.45**

*p< 0.05, **p< 0.01

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Table 4 Simple mediation results

Organisational climate for innovationa

Model Point Estimate (SE) 95% CI

Upper Lower

Total effect ( OCI OP ) 0.62** (0.07)

Direct effect ( OCI OP ) 0.29 (0.09)
Indirect effect ( OCI IWBOP ) 0.33 (0.01) 0.3721 0.0121

Note: 5000 Bootstrap samples. Standard errors indicated within parentheses. Estimates in bold have CIs that are
eexcluding the interval of zero for total and indirect effects indicating significant mediation. Bias correlated
confidence intervals (CI) and Standard errors (SE) reported. a Controlling for, age, gender, position and education

*p < 0.5; **p < 0.01

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Highlights

∙ Climate for innovation was positively associated with innovative work behavior.
∙ Innovative work behavior was positively associated with organizational performance.
∙ Climate for innovation was positively associated with organizational performance.

∙ Findings showed the mediating role of innovative work behavior

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