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Summary
This paper contributes to the discussion on contingencies of process innovations by focusing on and introducing organizational-level constructs of climate for initiative and psychological safety. We argue that process innovations, defined as deliberate and new organizational attempts to change production and service processes, need to be accompanied by climates that complement the adoption and implementation of such innovations. Our study of 47 mid-sized German companies examines the relation between process innovations, climates for initiative and psychological safety, and firm performance. Results show that climates for initiative and psychological safety were positively related to two measures of firm performance-longitudinal change in return on assets (holding prior return on assets constant) and firm goal achievement -and moderated the relation between process innovations and firm performance. Copyright (C) 2003 John Wiley & Sons, Ltd.
Introduction
'Innovation has become the industrial religion of the late 20th century. Business sees it as the key to increasing profits and market share. Governments automatically reach for it when trying to fix the economy' (Innovation in industry, 1999, p. A1). In particular, innovations aimed at enhancing organizational production and service procedures and processes such as Business Process Reengineering (BPR), Total Quality Management (TQM), Lean Production, Simultaneous Engineering, or Just-inTime Production (JIT) have been embraced by a wide variety of businesses with increasing frequency. We define those deliberate and new organizational attempts to change production and service processes as process innovations. While terms such as manufacturing practices and management techniques have been used to categorize new practices like team-based work and TQM (Waterson et al., 1999; Staw & Epstein, 2000), West et al. (2002-working paper) recognized these practices as innovations and distinguished between product innovation and innovations in production processes, work organization, and human resource management practices.We concur withWest et al. (2002-working paper) in viewing these as innovations due to the novel issues that are associated with their adoption and implementation.
Process innovations are assumed to bring multiple benefits to an organization and help an organization achieve competitive advantage. However, a considerable number of businesses have adopted these practices without much success. For example,Waterson et al. (1999) studied the effectiveness of several modern manufacturing practices in the UK and discovered that approximately 50-60 per cent of the companies thought their innovations met...