Learning Orientation and Radical Innovation as Antecedents of Business Performance

Abstract

In changing contexts, innovation is increasingly considered to be one of the key drivers of the long-term success of a firm. The main reason for this is that companies with the capacity to innovate will be able to respond to environmental challenges faster and to exploit new products and market opportunities better than non-innovative companies. In this context, entrepreneurial organizations show specific abilities of the organization for recognizing and exploiting opportunities by reconfiguring existing and new resources in ways that create advantage. As a consequence, entrepreneurial firms have been characterized by their commitment to innovation. Using data from 361 companies and through structural equation models, we examine empirically the effects of entrepreneurial orientation, learning orientation, and radical innovation on business performance. The research population included Brazilian organizations with more than one hundred employees located all around of this country. Our research was designed to cover a wide range of industries. The structured questionnaire was sent to CEOs of 3,000 companies by mail. All items used to operationalize the constructs were developed based on the extant literature. In terms of results, our study contributes to the comprehension of the antecedents of business performance in the context of a developing country. Specifically, the results reveal that product innovation has a positive effect on organizational performance, but also that an entrepreneurial orientation fosters product innovations as literature suggests. One of the findings of this study is that entrepreneurial-oriented firms, characterized by introducing in new or developing markets new activities, promote the generation of radical innovations for developing their activities. These innovations allow companies to increase their performance in the marketplace. Their activities require that these organizations look for new sources for generating ideas. Additionally, our findings suggest that learning orientation mediates the relationship between entrepreneurial orientation and radical innovation, revealing that entrepreneurial companies should be committed to learning to develop new products. The findings are presented along with the implications of the study, its limitations and recommendations for future research. Specially, firms should foster commitment to learning, shared vision and open-mindedness among their workers. In this respect, organizational members should be encouraged to think “outside the box” to find different perspectives about the business. Also, those actions may allow firms to improve their ability to thoroughly comprehend the environment which is crucial to achieve better results. Furthermore, a radical innovation approach should be fostered by companies since we found a positive effect of that construct on firms’ performance. Thereby, we suggest that companies engage their employees on research projects which may provide new ideas for existing products and new ones that may arise from “think tanks” within different departments.