Institutional Learning and Change Initiative

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Abstract:

This paper examines the link between organizational learning capability (OLC) and innovation performance. Organizational learning and knowledge creation play a substantial role in innovation. Organizational learning-oriented firms should therefore have an outstanding innovation performance. While there is theoretical support for a positive link between organizational learning and firm innovation, this link needs further clarification and empirical testing. We examine whether there is a positive link between OLC and innovation performance. To test this proposition, we carried out a survey in the European Union ceramic tile sector, which is a globalised manufacturing industry. The OLC construct is based on the contextual learning conditions, and consists of five dimensions: experimentation, risk taking, interaction with the external environment, dialogue and participative decision making. The innovation performance construct focuses on product and process innovation efficacy as well as on innovation efficiency. We classified respondents according their learning orientation: more learning-oriented firms were those with an above-median OLC; less learning-oriented firms were those with an OLC below this threshold. Results reveal that more learning-oriented firms have a significantly higher innovation performance. Findings are relevant for strategic management: OLC should be taken into account when formulating firm strategy since this capability affects innovation performance, and therefore organizational results. Furthermore, the paper provides practitioners with measurement tools that could be used to audit OLC and innovation performance in a particular organizational unit.