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However, on the Global Innovation Index 2014, Austria ranked only 20th and was overtaken by much smaller economies such as Iceland (19th), but also Hong Kong or Singapore (10th and 7th) (Cornell University, INSEAD, & WIPO, 2014, p. XXIV). In 2013, over 40% of Austrian enterprises stated to innovate in products and / or processes. Improving the quality of goods and services, increasing the range of those, and entering new markets were stated to be the main objectives for innovations in Austria (Eurostat
- European Commission, 2013, pp. 68–78). Overall, product innovations can be seen as being tightly linked to the primary activity of the company (Naranjo-Valencia, Valle, & Jiménez, 2010, p. 468). However, research shows that, generally, success rates in new product development are below 25% (Evanschitzky, Eisend, Calantone, & Jiang, 2012, p. 21).
Pushed by global competition and short-term performance pressures, managers often give in to personnel reductions or relocation to lower-cost regions. In that, they sacrifice true innovation, strong organic growth and clear competitive advantage (Porter & Kramer, 2011, p. 66). Thus, it goes without saying that there is room (and necessity) for improvement of the enhancement of innovation outcomes from a national, but also from a managerial perspective. Clearly, innovation always goes in line with risk – investing in product development and never being 100% sure that the product will be an entire market success is what keeps GCBF ♦ Vol. 11 ♦ No. 1 ♦ 2016 ♦ ISSN 1941-9589 ONLINE & ISSN 2168-0612 USB Flash Drive 280 Global Conference on Business and Finance Proceedings ♦ Volume 11 ♦ Number 1 managers from the financial efforts needed for innovation. Since this is only understandable from an individual’s point of view, it is still a risk that has to be taken if companies want to survive. Certainly, the risks and threats of new projects to the existing business of a firm have to be reflected when it comes to financial support, management systems or the location (Pfitzer, Bockstette, & Stamp, 2013, p. 105). But, overall, more research on success factors and organizational preconditions for innovation in Austria is needed in order to reduce the perceived risk that managers and companies experience here. For sure, innovation depends on a variety of different factors and includes extremely complex backgrounds. Looking into the literature on success factors for innovation reveals a very wide range of research studies and opinions immediately.
However, many authors agree that the soft factors in companies, such as organizational culture and values play a vital role for innovation performance. Nonetheless, particularly the idea how employee and management values relate to different aspects of organizational performance has received only scant treatment in business management research and can be seen as a research gap (Connor & Becker, 1979, pp.
71–81). Recent research points at a limited number of organizational values that enhance innovation. These
can be classified into the following aspects:
Trust and encouragement Pioneering spirit Intrinsically motivated performance Market-driven debates and discussion (Egger, 2015, pp. 38–39).
Interestingly enough, the value theme of trust and encouragement not only refers to such ideas as openness, participation and emotional safety, but also includes ethical, moral and altruistic aspects. In fact, these are positively correlated to product innovation outcomes in previous research amongst manufacturing companies, although managers generally do not rate them to be decisive for innovation performance (Egger, 2014, p. 385). Combining this background with the current trend towards corporate social responsibility concepts (Vollmers, 2015), the necessity for more intensive research on the interrelations of management ethics and successful innovation becomes obvious. Not only does ethical management increase a company’s reputation and brand from a marketing perspective, it also contributes to innovation performance. When sustainability is used as an overall strategy for competitive advantage and market positioning, it builds a fundament for future business growth and innovation (Kepler, 2011, p. 49). With that, the topic provides immense potential for current and future managers to strengthen organizational performance and company value on different levels at the same time.
Definition of the Terms in the Context of the Paper Innovation Innovation implies significant change within an organization or its product or service range. Therefore, it requires substantial adjustments in functions and structures and, most importantly, it needs to be successfully introduced, decided upon and incorporated into the organization (Delbecq & Mills, 1985, p.
25). Only a successfully marketed invention can be defined as an innovation. Hence, it is related to entrepreneurship as well and can be seen as the true effort to create change in the economic and social potential of a company that is purposeful and focused (Drucker, 1985b, p. 67). Innovation uses the opportunity of a new idea and turns this into widely used practice. Therefore, for profit-oriented organizations it is innovation, not only invention that helps them to gain economic growth. Being a good inventor is never a guarantee of commercial success (Tidd & Bessant, 2009, pp. 16–17). In this regard, innovation is also different from creativity. Through creativity, novel and useful ideas in basically any domain can be gained. Innovation implies the successful implementation of these ideas, though.
GCBF ♦ Vol. 11 ♦ No. 1 ♦ 2016 ♦ ISSN 1941-9589 ONLINE & ISSN 2168-0612 USB Flash Drive 281 Global Conference on Business and Finance Proceedings ♦ Volume 11 ♦ Number 1 Therefore, creativity can be seen as a necessary precondition or a starting point for innovation. However, innovation is not only about products. It may also be found in the means for creating or delivering it and basically describes the implantation of creative ideas within an organization (Amabile, 1996, pp. 1–3). Not necessarily does it have to be technical – there are great social innovations in history such as the newspaper, for example. Still, innovation is essentially about changing value and creating satisfaction for customers (Drucker, 1985a, pp. 31–33). The Organization for Economic Cooperation and Development (OECD) distinguishes four types of innovation: product innovation, process innovation, marketing innovation, and organizational innovations. Whereas product innovation relates to goods or services that are introduced to the market with new or significantly improved specifications, materials, software, or other functional characteristics, process innovation focuses on new or significantly improved production or delivery methods. Improvements in product design, packaging, promotion or even pricing are subsumed under marketing innovation according to the OECD. Finally, organizational innovation highlights changes and novelties in business practices, workplace organizations or external relations (OECD & Eurostat, 2005, pp.
47–51). For the context of this paper, the author follows the OECD perspective on innovation. Thus, when innovation is mentioned, it can relate to products, services, processes, marketing, or new business models.
When it comes to management ethics, a lot of different terms and concepts come into place that sometimes deal with very similar ideas such as business ethics, management ethics, corporate social responsibility, corporate citizenship, sustainability, or, very generally, the creation of shared value or stakeholder management. Further, academics and practitioners often have different terms in use and also different perceptions and interpretations about them (Waddock, 2004, p. 5). The following section outlines a common understanding of these different terms for the context of this paper. Business or management ethics are supposed to provide us with “rules, principles, and standards for deciding what is morally right or wrong when doing business” (Cambridge University Press, 2015a). At the core, ethics encompass the “study or the science of morals” – it addresses what is “morally right” (Cambridge University Press, 2015b).
However, the business ethics component also includes ethical decision-making, codes of conduct, and the idea to give an organization a broader sense than pure self-interest on profitability and economic performance. For a long time, compliance seemed to be the main reason for companies to implement a code of conduct at all.
But today, it is widely shared that common values contribute positively to organizational performance and competitive advantage (Waddock, 2004, pp. 19–20). The commission of the Austrian Chamber of Economics (Wirtschaftskammer Österreich – WKO) formally defines Corporate Social Responsibility (CSR) as the “responsibility of companies and their impact on society”. Accordingly, companies create an added value when accepting this challenge and building their business sustainably (Austrian Chamber of Economics (Wirtschaftskammer Österreich - WKO), 2015). However, there is still some confusion about the term. CSR essentially summarizes business practices that are socially responsible. For that reason, it can be seen as a concept that is much more about successfully applying appropriate attitudes and cultures than about building formalized structures and processes (Vázquez-Carrasco & López-Pérez, 2013, p. 3212).
CSR encompasses the idea that companies feel in charge of the prosperity of others in a community and the society as a whole (Factor, Oliver, & Montgomery, 2013, p. 144). Overall, the concept of CSR is still evolving and sometimes changing according to societal anticipations. However, in general, it goes beyond the idea that companies only have to fulfill their profit-making purposes (Boulouta & Pitelis, 2014, p. 351).
The concepts on CSR have further evolved into corporate citizenship, responsibility, reputation, and relationships. While CSR is seen to focus on the interrelations a company has with its societal and community stakeholders on a voluntary basis, corporate citizenship also includes the natural environment.
Waddock (2004, p. 13) actually uses the terms interchangeably.
GCBF ♦ Vol. 11 ♦ No. 1 ♦ 2016 ♦ ISSN 1941-9589 ONLINE & ISSN 2168-0612 USB Flash Drive 282 Global Conference on Business and Finance Proceedings ♦ Volume 11 ♦ Number 1 Moreover, the concept also includes a company’s values, principles and ethics and how they determine an organization’s impact on its stakeholder and the environment. In practice, the term often encompasses the “do-good” things that companies do in some way or another (Waddock, 2004, pp. 9–15). With regard to business organizations, CSR means that everything companies do must be good for the organization, but also for the world – social, economic, and environmental needs must be met at the same time. However, today, CSR is also often used as an equivalent to sustainability (Gobble, 2012, p. 64). The United Nations officially define sustainability as “a standard of living for everyone today without compromising the needs of future generations” (United Nations, 2015). Kepler (2011, p. 53) states that sustainability must encompass the idea of a company to go beyond making profits or being green. Instead, embracing the sustainability concept means to create products and services that integrate economic, environmental, and social needs (Kepler, 2011, p. 53).
The core idea of these different concepts mainly is that companies can hardly exist without stakeholder relationships and these connections naturally include moral implications. In former times, this was focused particularly on politics. Today, a broader perspective is taken and must be encouraged (Waddock, 2004, pp. 25–26). In the context of this paper, the author focuses on the idea of management ethics in terms of promoting ethical values in an organization. In companies, these can be manifested in corporate social responsibility programs, a code of conduct, or sustainability reports, for example. In that, these terms will be used in the following literature review and onwards. However, the fundament of these activities and “visual outcomes” of management ethics is built by organizational values. Organizational values as such are seen as a set of underlying shared norms and standards which the employees of a company agree to and which they find valuable and worth pursuing, and which lead their activities and determine their daily organizational behavior and decision-making (Egger, 2015, p. 18). Thus, if these values contain ethical aspects like integrity, altruism, responsibility, honesty, equality, and humanity, for example, it is assumed that management overall is ethical.
In general, CSR enhances national competitiveness, particularly in less innovative countries. Most probably that is because CSR helps with differentiation for companies in less innovative markets. It is therefore suggested, that national and governmental initiatives promote CSR activities and CSR-differentiation strategies (Boulouta & Pitelis, 2014, p. 360). Very often, corporate social responsibility programs are seen as a necessary duty and pushed by the expectations of the public – but not very helpful for a business’s
profits. However, in fact, companies are and have always been highly dependent on their surroundings: