Research by: Donald L. Amoroso, Ricardo A. Lim, & Jose Gerardo O. Santamaria
Executive Summary
The current volatile, uncertain, complex and ambiguous business environment has placed a premium on an organization’s ability to innovate. The paper seeks to determine the internal leadership practices that drive business model innovation. While innovation has many antecedents, we focus on a model of empowering leadership, managerial and team creativity, and exploration. Previous studies have studied empowerment, creativity, exploration and innovation separately. Our study combines previous work into one model. Moreover, we attempt to separate creativity into manager and team components. Lastly, we investigate direct, rather than mediated, pathways; for example, if exploratory orientation to innovation was previously mediated by bricolage, and empowerment to innovation was mediated by creativity, we now test direct effects. Our research questions were as follows; is empowering leadership associated with team and manager creativity, are perceptions of team and manager creativity associated with exploration behaviors, is empowerment associated with exploration of opportunities, is team creativity associated with business model innovation, and are exploration behaviors associated with business innovation models? By fostering good practices such as empowerment, leaders can build the necessary ‘internal ecology’ for innovation.
Compared with other leadership styles, empowering leadership—promoting participation to enhance meaning, expressing confidence and providing autonomy, has been found to lead to increased productivity, performance, and creativity. Creativity is an antecedent of innovation. Creative behavior can be manifested in managers and their teams, who collectively develop novel ideas, and convert these into new products, services, processes, markets or sources of supply. In addition to empowerment and creativity, organizations must simultaneously seek external opportunities through exploration while balancing firm activities around sustaining current product sales. Exploration is therefore another antecedent to innovation.
Empowering leadership is defined as “the process of implementing conditions that enable sharing power with an employee by delineating the significance of the employee’s job, providing greater decision-making autonomy, expressing confidence in the employee’s capabilities and removing hindrances to performance.” Employees need to recognize that they can regulate their own actions, perform their own jobs and influence outcomes. Creative teams work best when given autonomy, which generates positive affect among team members. Members take risks, experiment and discover activities for building new knowledge. Empowered employees can direct their own exploitation and exploration activities, and develop their ability to identify business opportunities as they feel more responsible and competent. Working with supportive leaders increases the ability of employees to recognize opportunities in the market. Leaders create a supportive work environment to bring out individuals’ creative performance; managers give feedback and show support, even when employees suggest unpopular ideas.
Team creativity is defined as the generation of novel and useful ideas by a group individuals. Creative teams generate more ideas, analyze the most promising ones and implement product and service innovations, thereby creating value for the organization. Organizations with norms of exploration will motivate their members to continue exploring new ideas. When teams have high levels of such norms as searching for new ways of looking at problems and cooperating in developing and applying ideas, team creativity translates into innovation implementation.
Creativity begins at the individual level, and creative ideas must be novel and useful. Creativity is a necessary but insufficient factor in making novel ideas; other conditions are needed for innovation to occur. Managers use influence to transfer creativity and other behaviors to their team followers, they model behaviors, and studies have found positive relationships between the creativity of managers and the teams they lead. Managers with strong creativity and centrality can have a stronger effect on active exploration and opportunity search strategies. Further, empowering creative managers enable teams to explore and to be creative.
The hypothesized relationships were tested on a sample of 1,149 respondents (55% female, 84.5% aged between 21 and 50, 89.5% with at least a bachelor’s degree, and 52.6% in a lower or middle management position). We developed a structural equation model to test the relationships between empowerment, manager and team creativity, exploratory orientation and business model innovation. Except for two pathways, we found that empowerment was generally associated with a manager’s ability to create new ideas and explore new approaches. Manager creativity was associated with team creativity. The model indicates that creativity at both levels was strongly associated with exploration orientation, which was associated with innovative business models.
Unexpectedly, the relationship between empowering leadership and exploratory orientation was not significant. We also found no support for the relationship between team creativity and business model innovation. Our model suggests that mere empowerment may not expand the scope of employees and teams to spot opportunities. Exploration may instead come from accumulated knowledge about the environment and setting up diverse but interlinked innovation teams. Literature suggests that teams do an initial stage of creation and divergent thinking, followed by non-creative, implementing, convergent stage, for best learning and innovation. Managers who initially empower and create, and later give strong direction and stop the creative process, might be more innovative.
Teams perform important processes in order to compete in today’s challenging business environment. Teams are tasked to rapidly generate and convert ideas into new products, services, processes, markets or sources of supply. Managers can directly influence team creativity by shaping the work environment through empowering leadership, by allowing greater decision-making autonomy, expressing confidence in the team’s capabilities, and removing obstacles to performance. Creativity, exploration and innovation should follow. Finally, managers must mind team dynamics, conflict and trust. Regardless of norms and team composition, unbridled conflict can derail the team. Trust can be established by building team safety, that is, remove the fear of members about challenging the status quo by setting up a climate of productive discussion, instead of self-protection.
To cite this article: Amoroso, D. L., Lim, R. A., & Santamaria, J. G. O. (2021). Business model innovation: A study of empowering leadership. Creativity and Innovation Management, 30(2), 286-302. https://doi.org/10.1111/caim.12439
To access this article: https://doi.org/10.1111/caim.12439
About the Journal
Creativity and Innovation Management fills a crucial gap in management literature between the theory and practice of organizing imagination and innovation. It gives managers insights into introducing innovation within their organizations and accelerating the development of creative performance in their staff. The journal’s central consideration is how to challenge and facilitate creative potential, and how then to embed this into results-orientated innovative business development.
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