Innovation purchase decision forces: from micro to macro and back again.

Author:Nicholas, Karen
 
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INTRODUCTION

Adoption of a new product has been widely studied (for example, Abrahamson, 1991; Daft, 1978; Damanpour, 1991; Meyer & Goes, 1988), while non-adoption has understandably not been as researched, with only fifty-nine articles returned on a search of non-adoption (Search completed in Business Source Complete on June 30th, 2012). Non-adoption has direct impacts, most directly on the lack of growth or the failure of the company selling the product. In this case study, the product's non-adoption in the marketplace is examined from multiple perspectives in an attempt to gain insight on the forces behind the limited sales. Based on marketplace feedback, the product was interesting and had value, the founders knowledgeable and respected, and return on the investment studies showed a quick and strong return; so what could be the reason?

Both macro and micro forces will be examined, as they are relevant in any research involving a decision. At the macro level, isomorphism and the potential lack of legitimacy will be explored as this theory may be relevant for a new company in a mature and highly structured industry. At the organizational level, strategic forces will be investigated to ascertain their level of influence on the adoption of a new innovation, and finally, individual decision-making forces will be examined. These three forces can act on any organizational decision and play significant roles in this case study.

OVERVIEW OF THE CASE STUDY

There are two key elements to this case study; the innovative product being offered to the marketplace and the potential customers who can make the decision regarding the innovative product. This article will examine these two elements in turn, applying relevant theories to explain the outcome and examining the interplay between them. After the theoretical discussion, research from the case study will endeavor to highlight where and when the theories were applicable.

The company at the heart of this case is a start-up software company founded by a team of seasoned executives, known and respected in their industry of point-of-sale software which is software aimed at retailers. Two of the key founders left a large established software company and the software was developed based on requests from customers of the established company. The business model was developed to reduce the up-front risk typically seen with a new software company by using a Software as a Service (SAAS) model, avoiding the up-front software and hardware expenses in exchange for recurring monthly fees.

The retail industry was the target of the case study company, and that may have set the stage for the outcome. The retail industry is not seen as a technology front-runner and frequently plays catch-up with other industries (Walsh, 1991). Furthermore, as the case study will illuminate, the opportunities to search for and locate new technology innovations are neither frequent nor common in the retail industry, leaving industry executives with fewer innovative options than may be found in other industries.

THEORETICAL OVERVIEW

In order to appropriately place this case study within the current stream of knowledge, a brief overview of the research on innovation, isomorphism, strategy and decision making will be conducted. These four streams will provide the framework used to examine the case study company and the decision makers involved.

Innovation

The goal to be innovative is driven by both internal survival mandates as well as organized pressures from governments around the world (for the United States of America's perspective, read National Economic Council, Council of Economic Advisers, & Office of Science and Technology Policy, 2011). It seems to be a given that innovation will be the key to future economic success, even if research has shown the opposite to be the case (Avlonitis, 2001; Gargeya & Brady, 2005; Massa & Testa, 2008). However, during this recent recession, more companies are reluctant to take a risk on a new innovation, perhaps highlighting that the research results have now trickled down into the practitioner community. Nonetheless, the push to be innovative in some form or fashion remains strong.

Technology has always been a key element in innovation, from the introduction of electricity to the recent push to use online media to reach more potential customers. Software has frequently provided the capability to incorporate and develop innovative practices. However, the stigma of start-up software companies that gloriously failed in the past (Li, Shang, & Slaughter, 2010) can provide a prospective customer with a good reason to adopt a wait and see attitude, giving the incumbent and proven software companies further growth opportunities and larger market share.

A strong pro-innovation bias has been found in academic innovation research (Downs Jr & Mohr, 1976), leading to research taking for granted the positive benefits of innovative activities. However, this bias influences the questions asked as well as the questions not asked (Abrahamson, 1991) leading to a further propagation of the bias. An examination of innovation which does not automatically assume that innovation is beneficial to an organization may uncover the negative consequences of generating or adopting innovations. For example, research into the Y2K scare (Quiggin, 2005) has uncovered the enormous cost and the unrealized benefit of adopting and generating innovations to deal with a largely nonexistent threat.

The strong pro-innovation bias and normative slant is also evident in practitioner journals. These have numerous articles on innovation, indicated by a Harvard Business Review website search for innovation articles from July 2011 to June 2012 that resulted in just under fifty articles. These articles, and articles in other practitioner journals, have the unenviable task of depicting innovation as a manageable process that can be successfully achieved if organizations follow guidelines, processes and principles (Anthony, Johnson, Sinfield, & Altman, 2008).

Isomorphism

Multiple taxonomies regarding innovations may be utilized in research; nonetheless, analyzing generation or adoption of innovation typologies alone will not provide an understanding of the rationale behind an innovation decision. Organizational theory can provide multiple reference frames for analyzing and explaining organizational behaviors and actions (Astley & Van de Ven, 1983), of which innovation adoptions are but one.

Institutional theory analyses the institutional forces pressuring organizations to adopt common behaviors and structures in the goal to increase legitimacy (DiMaggio & Powell, 1983). These deterministic forces may be mimetic, coercive or normative. Mimetic isomorphism reduces the uncertainty facing organizations as they imitate the actions and behaviors of successful organizations. Coercive isomorphism is driven by both formal and informal channels, as regulatory and other legalized mechanisms in addition to the cultural, yet informal, rules and requirements drive commonality in structure and deeds. Normative isomorphism is seen as driven by professional organizations that aim to influence their members' conduct, yet can also include 'the tendency for executives to enact the ideas, norms, and language expected of members of their managerial class' (Hambrick, Finkeistein, Cho, & Jackson, 2005, p. 314).

These isomorphic forces may be due to the linkages between organizations, though social pressures can also exert pressures (Dacin, 1997). The goal of achieving social success drives isomorphic behavior, even when information is present that the behavior may not lead to positive consequences (Barreto & Baden-Fuller, 2006). The outcome of isomorphic forces is a sense of a pre-determined world where there is little room for the organization to choose their own path.

The connection between organization theory and innovation can be found in many locations. While innovations may be able to be examined as a discrete activity independent of external influences, organizations are complex and innovations are an element of that complexity. Thus, organizational theory can assist in providing context and explanations for...

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