Radical Innovation Across Nations: The Preeminence of Corporate Culture

Gerard J. Tellis, Jaideep C. Prabhu & Rajesh K. Chandy
Journal of Marketing
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Executive Summary
Radical innovation is crucial to the growth of firms and economies. Firms at the leading edge of innovation tend to dominate world markets and promote the international competitiveness of their home economies. Thus, radical innovation simultaneously drives market growth, firms’ success, and nations’ economic growth.

Because of its importance, authors across various disciplines have proposed many theories about the drivers of such innovation. These drivers include government policy and labor, capital, and culture at the nation level. The authors contrast these theories with one based on the corporate culture of the firm and test their theory using survey and archival data from 759 firms across 17 major economies of the world.

The results suggest the following: First, among the factors studied, corporate culture is the strongest driver of radical innovation across nations. Culture consists of three attitudes and three practices. The attitudes are willingness to cannibalize, tolerance for risk, and future orientation. The practices are empowerment of product champions, internal competition, and incentives for enterprise. Second, the commercialization of radical innovations translates into a firm’s financial performance; it is a stronger predictor of financial performance than other popular measures such as patents.

This study leads to two important conclusions. First, several factors do not seem to be as important drivers of radical innovation in firms across nations as many researchers believe. Among these are some frequently emphasized metrics of government regulation and national-level labor, capital, and culture. In contrast, a firm’s corporate culture is an important driver of radical innovation. The reason this is proposed for this pattern of results is as follows: The current economic environment is characterized by increasing globalization and the lowering of barriers to mobility of labor and capital. This “flattening” is often accompanied by the rapid adoption of best practice and policy by governments. In such an environment, national-level drivers are unlikely to be major discriminators of firms’ performance, at least in the 17 nations sampled in this article. In contrast, corporate culture is a factor that is unique, intangible, sticky, and difficult to change. Moreover, success in one generation of technology can breed attitudes of complacency and invulnerability with a focus on managing current products and protecting current profits that brought that success. These cultural traits can blind a firm to radical innovations on the frontier. Thus, maintaining a culture of relentless innovation is difficult.

Second, the authors find that radical innovations translate into financial value to the firm, even after controlling for patents, research and development, and other variables. The result underscores the validity and importance of our measure of radical innovation.

The findings have important implications for managers, researchers, and policy makers. First, this study suggests that firms are special forms of organization that increasingly transcend national boundaries, constraints, and systems. Second, when fostering a culture of innovation, the analysis suggests three attitudes to aspire to and three practices that can instill those attitudes. Third, the study highlights the usefulness in a cross-national context of an output based measure of radical innovation (i.e., radically new products) over surrogates used in the past, such as patents and national-level scientific talent.

Biography
Gerard J. Tellis (PhD, University of Michigan) is Director of the Center for Global Innovation, Neely Chair of American Enterprise, and Professor of Marketing in the Marshall School of Business at the University of Southern California. Dr. Tellis is an expert in innovation, market entry strategy, pricing, new product growth, global diffusion, and advertising. He has published four books and more than100 articles (see http://www.gtellis.net) that have earned more than 2400 citations, based on Google Scholar. His publications have won 15 awards, including four of the most prestigious awards in the field of marketing: the Frank M. Bass Award, the William F. Odell Award, the Harold D. Maynard Award (twice), and the Vijay Mahajan Award for lifetime contributions to marketing strategy. His book titled Will and Vision: How Latecomers Grow to Dominate Markets (coauthored with Peter Golder, McGraw-Hill) explains how a firm can be relentlessly innovative to capture market leadership. The book was cited as one of the top-ten books in business by the Harvard Business Review and was the winner of the American Marketing Association/Berry Award for the best book in marketing over the last three years. His recent book, Effective Advertising: How, When, and Why Advertising Works, summarizes almost 50 years of research on advertising effectiveness. It was twice nominated for the American Marketing Association/Berry Award for the best book in marketing. His latest book, Handbook of Advertising, brings together 30 chapters by istinguished experts in advertising. Dr. Tellis is a Trustee of the Marketing Science Institute and a Senior Research Associate and Visiting Chair of Innovation, Marketing, and Strategy in the Judge Business School at Cambridge University. He has also been a Distinguished Visitor at Erasmus University, Rotterdam. Previously, he worked as a sales development manager for Johnson & Johnson. Dr. Tellis is associate editor of Journal of Marketing Research and has been on the editorial review boards of Journal of Marketing Research, Journal of Marketing, and Marketing Science for several years.

Jaideep C. Prabhu is Jawaharlal Nehru Professor of Indian Business and Enterprise, AIM Innovation Fellow, and Director of the Centre for Indian Business, Judge Business School, University of Cambridge. He has previously been on the faculty at Imperial College London, Tilburg University, and University of California, Los Angeles, and has a BTech from the Indian Institute of Technology (New Delhi) and a PhD from the University of Southern California. He has taught and consulted with executives from ABN Amro, British Telecom, EDS, Egg, ING Bank, Nokia, Oce Copiers, Philips, Roche, and Xerox, among other companies, in the Colombia, Finland, Germany, the Netherlands, Portugal, Switzerland, the United Kingdom, and the United States. He has also consulted for the U.K. Department of Trade and Industry, for whom he cowrote a white paper on innovation. He has recently been awarded a fellowship from the U.K.’s Advanced Institute for Management Research to work on a large project on the off-shoring and outsourcing of innovation by the world’s largest multinational corporations. His research interests include radical innovation and managerial learning, particularly in high-technology industries, such as pharmaceuticals and e-banking.

Rajesh K. Chandy is James D. Watkins Chair and Professor of Marketing in the Carlson School of Management at the University of Minnesota. His research has received several awards, including the Journal of Marketing Harold Maynard Award for contributions to marketing theory and thought, the American Marketing Association’s Early Career Award for Contributions to Marketing Strategy, and the Marketing Science Institute Alden Clayton Dissertation Award. Chandy teaches full-time MBA, part-time MBA, and executive education programs in the Carlson School of Management. His teaching awards include the Carlson School Outstanding Professor of the Year Award, the Carlson School Award for Excellence in Teaching, and the Outstanding Faculty Dedication Award. Chandy has served on the U.S. Commerce Secretary’s Advisory Committee on Measuring Innovation in the 21st Century Economy. He is also a member of the Academic Council of the American Marketing Association, and the Knowledge Development Coalition of the American Marketing Association. Chandy received his PhD from the University of Southern California.

Journal of Marketing, Volume 73, Number 1, January 2009
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Gerard J. Tellis, Jaideep C. Prabhu & Rajesh K. Chandy
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