The Impact of Organizational Learning on Organizational Performance and Organizational Innovation: Evidence from Bank Industry of Iran

Transcription

1 Int. j. econ. manag. soc. sci., Vol(3), No (10), October, pp TI Journals International Journal of Economy, Management and Social Sciences The Impact of Learning on Performance and Innovation: Evidence from Bank Industry of Iran ISSN: Copyright All rights reserved for TI Journals. Seyed Habib Maktabi Department of Management, Qeshm International Branch, Islamic Azad University, Qeshm, Iran. Amir Khazaei* Department of Management, Qeshm International Branch, Islamic Azad University, Qeshm, Iran. *Corresponding author: Keywords organizational learning organizational performance organizational innovation Abstract In order to cope with the current external opportunities and threats, it is argued that organizations have to learn, that is, acquire new knowledge and skills that will improve their existing and future The objective of this study was to investigate the impact of organizational learning on organizational innovation and Data were collected with questionnaire instruments. Model was developed and tested with structural equation model using data collected from the 273 Iranian bank employees. The results show that organizational learning has positive impact on organizational innovation and organizational 1. Introduction In order to cope with the current external opportunities and threats, it is argued that organizations have to learn, that is, acquire new knowledge and skills that will improve their existing and future In fact, it is proposed that the only competitive advantage the company of the future will have is the ability of its managers to learn faster than the competitors. Many other researchers suggest that the effective strategy for sustaining and improving a firm s competitive edge and performance is organizational learning [19]. Previous research [16] indicated that human resource management strategies result in better organizational learning, organizational innovation, and knowledge management capability, which ultimately contributes to achieving organizational performance, organizational learning improves organizational innovation and accumulates knowledge management capability, organizational innovation results in knowledge management capability development, which contributes to the establishment of organizational development, and technological companies should utilize organizational knowledge in order to enhance organizational Salim and Sulaiman (2011) in their empirical study attempted to investigate the effect of organizational learning on innovation as well as the impact of innovation on company They founded that organizational learning contributes to innovation capability, and that innovation is positively related to firm Research also indicates that the effect of organizational learning on firm performance is likely to be both direct and indirect because the creation of innovative culture through learning allows firm to achieve a better competitive position and above-average performance [4, 5, 14]. Therefore, understanding the relationships between organizational learning and organizational innovation and organizational performance is the main concern of this study in Iran. We used structural equation model to test proposed model among 273 employee of world's largest Islamic bank (BMI) in an Islamic country, Iran. Results from this study will help to determine a robustness of results generated by previous studies and this research endeavor has practical implications for bank management concerned with bank services in Iran to pay more attention to innovation and learning among their employees. The remainder of this article is organized as follows: First, we review the theoretical background and conceptual framework. We then develop several hypotheses to be tested and describe the empirical approach and the data collection. The last section presents the findings, result and discussion. 2. Literature review 2.1 learning learning is widely discussed in the literature across a myriad of fields, ranging from patient safety in health care and military readiness to library effectiveness, from information systems to student learning in school systems. Through learning, organizations can adapt to the environmental constraints, avoid the repetition of past mistakes and preserve crucial knowledge that might otherwise be lost [22]. From the management perspective, a number of studies distinguish various types and levels of learning. For instance, Fiol and Lyles (1998), distinguish between higher and lower levels of learning. Senge (1990) differentiates adaptive from generative learning. In addition, Dodgson (1991) identifies strategic and tactical learning. From an organization theory perspective, Argyris and Schon (1978) propose a typology of learning which involves single loop, double loop, and deutero-learning. In general, it is considered as the process of developing new knowledge and insights derived from common experiences of people within the organization and it has the potential to influence behaviors and improve a firm's capabilities [24]. 2.2 innovations innovativeness is studied in many disciplines, such as management/strategy, entrepreneurship, and marketing. Literature provides two perspectives of looking at organizational innovation. The first perspective argues that innovation is a form of learning [18] or something new [10]. Peters and Waterman (1982) suggest innovation is a means through which organizations respond to a variety of environmental changes while Rogers (2003) and Tushman and Nadler (1986) argue that innovation refers to a new idea, product, method or service adopted in organizations. Another stream of researchers perceives innovativeness as a multi-dimensional organizational trait [19].

2 Seyed Habib Maktabi, Amir Khazaei * performance Specialists in many fields consider organizational performance as involving strategic planners, operations, finance, legal, and organizational development. performance is an indicator which measures how well an enterprise achieves their objectives. An organization can assess organizational performance according to the efficiency and effectiveness of goal achievement [13]. Andersen (2006) states that the concept of effectiveness is a ratio, implying that two entities are required when defining and measuring effectiveness (e.g. return on assets). Andersen also regards effectiveness as the degree of goal attainment (i.e. the achievement of profitability). In other words, organizational performance comprises the actual output or results of an organization as measured against the intended outputs. Schermerhorn et al. (2002) point out that performance refers to the quality and quantity of individual or group work achievement. Recently, organizational performance, effectiveness, and efficiency are synonyms which are interchangeable [11]. Hancott further points out that a number of indicators have been adopted to measure organizational performance since mid-1900, such as profit growth rate, net or total assets growth rate, return on sales, shareholder return, growth in market share, number of new products, return on net assets, etc. 3. Theoretical framework learning supports creativity, inspires new knowledge and ideas and increases the potential to understand and apply them, favours organizational intelligence and (with the culture) forms a background for orientation to organizational innovation [19]. High levels of commitment to learning are attributed to greater innovative orientation and activity [23]. As the result, organizational learning is one of the critical factors that sustain an organization's innovative ability. According to Argyris and Schon (1978), organizational learning will enhance a firm's innovativeness, especially in knowledge intensive industries. These arguments lead us to our first hypothesis: H1: organizational learning positively influences organizational innovation. Innovation can lead to increased market share, greater production efficiency, higher productivity growth, and increased revenue [21]. According to Zahra, Ireland & Hitt (2000), innovation enables firms to offer greater variety of differentiated products that can improve financial Zhou, Tan and Uhlaner (2007) found no positive effect of innovation (new products and new service) on Dutch firms. The study conducted by Damanpour and Evan (1984) proves that administrative and technological innovations improve business outcomes. Thus, we hypothesize: H2: organizational innovation positively influences organizational Ruiz-Mercader et al. (2006) contend that individual and organizational learning show significant and positive effects on organizational In fact, Zellmer-Bruhn and Gibson (2006) state that team learning positively influences both task performance and the quality of interpersonal relations. While Hanvanich et al. (2006) demonstrate how learning orientation and organizational memory are related to important organizational outcomes. Thus, we hypothesize: H3: organizational learning positively influences organizational 4. Methodology 4.1 Measurement instrument To measure the effects of organizational learning on organizational innovation and performance, in the research was used the 12-items questionnaire developed by Kuo (2011) that shown in table (1). Consequently, twelve items scale was taken into account for organizational learning (4-items), organizational innovation (2-items), organizational performance (6-items) construct with a five point scale ranging from 1 (strongly disagree) to 5 (strongly agree). For internal reliability, Cronbach s alpha coefficients were calculated for all items of each construct. Results indicated that all the scales were considered to be reliable (Cronbach s alphas). Figure 1. The conceptual model of the study To determine reliability of the questionnaire, in this research, used Cronbach's alpha. Cronbach s alpha for constructs are: organizational learning: 0.792, organizational innovation: 0.602, organizational performance: So the questionnaire reliability is acceptable.

3 571 The Impact of Learning on Performance and Innovation: Evidence from Bank Industry of Iran For determining validity, convergent validity was assessed for all constructs and indicators. Convergent validity was assessed by examining the factor loading for statistical significance. Measures (organizational learning, organizational innovation and organizational performance) were subjected to a confirmatory factor analysis (CFA). All factor loadings ranged from 0.45 to 0.83 and were statistically that shown Table Sample In this research, the samples include bank employees of Bank Melli Iran Mazandaran province - margin of Caspian Sea in Iran. From 273 questionnaires that had been distributed, all of them were completed that were ready for analyzing. The samples of 273 respondents were 53.5 percent male (n=146) and 46.5 percent female (n=127), and 27.8 percent were less than 30 year of age and 46.5 percent were between 31 -to 50 year of age and 25.6 percent were above 51. Table 1: Measurement Model Items and Estimate coefficients Construct Measurement items Factor Loading learning 1. Your organization encourages employees to share work experiences or learning reflections. 2. Employees in your organization actively explore the current market and related new product information. 3. Employees in your organization actively improve their professional competencies. 4. Employees in your organization set work-related goals and try to accomplish innovation performance them. 5. Your organization values technological innovations that will enhance market competitiveness. 6. Your organization establishes reward policies for new ideas and innovations proposed by employees. 7. Your organization has the ability to provide customers with high quality goods and services. 8. Your organization has multiple recruiting strategies to attract talents. 9. Your organization provides well-designed wellness programs to retain employees. 10. Your customers are satisfied with your organization's service quality and efficiency. 11. Your organization facilitates management to effectively utilize employees with task-related resources in order to help employees to complete their jobs. 12. Your organization values the interactions between management and staff, and among staff members Results The proposed hypotheses were tested using structural equation modeling (SEM) via LISREL. To determine whether the hypotheses were supported, each structural path coefficient was examined with fit indices of the proposed model. The fit indices of model shown in Table (2). Model displayed reasonably good fit to the data. Fit statistics Table 2: Fit Indices of Models The measured value NFI 0.93 NNFI 0.93 CFI 0.95 GFI 0.89 IFI 0.95 RMSEA In Model, organizational learning significantly and positively affects organizational learning (H1). innovation significantly and positively affects organizational performance (H2). Finally, organizational learning significantly and positively affects organizational performance (H3). Therefore, all hypotheses were supported in the predicted directions. Table 3: The results of hypotheses testing Path Path coefficients t-value Testing result learning organizational innovation Supported innovation organizational performance Supported learning- organizational performance Supported

4 Seyed Habib Maktabi, Amir Khazaei * Discussion Figure 2. LISREL measurement model diagram The objective of this study was to examine the effect of organizational learning on innovation and The proposed hypotheses were tested using SEM. path coefficients of H1, H2 and H3 were statistically significant in the predicted directions. This study concludes that organizational learning has positive impact on organizational innovation (H1) that is consistent with findings of Kuo, 2011; Ju et al., 2006 and Ruiz-Mercader et al., An organization committed to learning attempts to deeply understand its environment, which includes the customers, competitors, and emerging technology. Innovation also involves the desire to adopt new ideas. This means that a positive learning climate is valuable for firms that seek to outperform its competitors through various innovation processes. Managers should therefore, create and promote the eagerness to learn among their employees so that they develop new skills and share existing knowledge [19]. Also, this study show that organizational innovation has positive impact on organizational performance (H2) which supports previous researches [16, 6, 1].So, in order to enhance organizational performance through innovation, managers should values technological innovations and should establish reward policies for new ideas and innovations proposed by employees. Ultimately, previous researches [16, 15, 17] show that organizational learning positively affects organizational Since performance is a central concern to all firms, so organizations should encourage employees to share work experiences or learning reflections, and employees should actively explore the current market and related new product information and actively improve their professional competencies and should set work-related goals and try to accomplish them to enhance organizational performance directly and indirectly through organizational innovation because the creation of innovative culture through learning allows firm to achieve a better competitive position and above-average Results of this study offer several implications for researchers and Iranian bank managers. For researchers, it enriches the research on the relationship between organizational factors. Some limitations to this study should be noted, and efforts to resolve them would serve as avenues for future research in this field. First, the findings of the study may have limited generalizability. The sample, which seemed appropriate for this particular study, was employees from Mazandaran province in Caspian Sea margin, Iran. It would be more meaningful if the same findings hold consistent in different types of employees from other cities across the country. Also, it was tested in Iran, but since there may be differences between Iran and other countries, researchers should use some caution when citing the results. References [1] Aragon-Correa, J.A., Garcia-Morales, V.J. and Cordon-Pozo, E leadership and organizational learning's role on innovation and performance: lessons from Spain, Industrial Marketing Management, Vol. 36, pp [2] Argyris, C., and Schön, D. A learning: A theory of action perspective. Addison-Wesley Publishing company: Reading, MA: Addison-Wesley. [3] Andersen, J.A leadership, personality and effectiveness, journal of Socio-economics, Vol. 35 No. 6, pp [4] Baker, W., and Sinkula, J Learning Orientation, Market Orientation, and Innovation: Integrating and Extending Models of Performance. Journal of the Academy of Marketing Science, Vol. 27 No. 4, pp [5] Bates, R., and Khasawneh, S learning, learning culture, learning climate and perceived innovation in Jordanian organizations. International Journal of Training and Development, Vol. 9 No. 2, pp [6] Bonifacio, M. and Molani, A the richness of diversity in knowledge creation: an interdisciplinary overview, Journal of Universal Computer Science, Vol. 9. pp [7] Dodgson, M Technology Learning, Technology Strategy and Competitive Pressures. British Journal of Management, Vol 2, pp [8] Damanpour, F. and Evan, W.M organizational innovation and performance: the problem of organizational lag, Administrative Science Quarterly, Vol. 29, pp [9] Fiol, M., and Lyles, M Learning. Academy of Management Review, Vol. 10 No. 4, pp [10] Gopalakrishnan, S., and Damanpour, F A review of innovation research in economics, sociology and technology management. Omega, International Journal of Management Science, Vol. 25 No. 1, pp [11] Handcott, D.E The relationship between transformational leadership and organizational performance in the largest public companies in Canada, unpublished doctoral dissertation, Capella University, Minneapolis, MN.

5 573 The Impact of Learning on Performance and Innovation: Evidence from Bank Industry of Iran [12] Hanvanich, S., Sivakumar, K., Tomas, G. and Hult, M The relationship of learning and memory with organizational performance: the moderating role of turbulence, Journal of the Academy of Marketing Science, Vol. 34, pp [13] Ho, L.-A meditation, learning, organizational innovation and performance, Industrial Management & Data Systems, Vol. 111 No. 1, pp [14] Huber, G. P learning: The contributing processes and the literatures. Organization Science, Vol. 2 No. 1, pp [15] Ju, T.L., Li, C.Y. and Lee, T.S A contingency model for knowledge management capability and innovation, Industrial Management & Data Systems, Vol. 106, pp [16] Kuo, T.H How to improve organizational performance through learning and knowledge, International Journal of Manpower, Vol. 23, No. 5/6, pp [17] Ruiz-Mercader, J., Merono-Cerdan, A.L. and Sabater-Sanchez, R Information technology and learning: their relationship and impact on organizational performance in small business, International Journal of Information Management, Vol. 26, pp [18] Ries, K., and Trout, N Dimensions of innovation in the hospitality industry. International Journal of Contemporary Hospitality Management, Vol. 9 No. 7, pp [19] Salim, I.M. and Sulaiman M Learning, Innovation and Performance: A Study of Malaysian Small and Medium Sized Enterprises, International Journal of Business and Management, Vol. 6, No. 12, pp [20] Senge, P. M The fifth discipline: the art and practice of the learning organization. New York: Doubleday Currency. [21] Shefer, D., and Frenkel, A R&D, firm size and innovation: an empirical analysis. Technovation, Vol. 25 No. 1, pp [22] Tohidi, H. Seyedaliakbar S. M. Mandegari, M organizational learning measurement and the effect on firm innovation, journal of enterprise information management, Vol. 25 No. 3, pp [23] Ussahawanitchakit, P Impacts of Learning on Innovation Orientation and Firm Efficiency: an Empirical Assessment of Accounting Firms in Thailand. International Journal of Business Research, Vol. 8 No. 4, pp [24] Valle, S. R. Valencia, J. C. N. Jimenez, D. J. Caballero, L. P linking organizational learning with technical innovation and organizational culture, journal of knowledge management, Vol. 15, No. 6, pp [25] Zahra, S., Ireland, R., and Hitt, M International expansion by new venture firms: international diversity, mode of market entry, technology learning, and performance? Academic of Management Journal, Vol. 43 No. 5, pp [26] Zhou, H., Tan, S., and Uhlaner, L.M Knowledge Management, Innovation Orientation and Innovation Performance. SCALES. [27] Zellmer-Bruhn, M. and Gibson, C Multinational organization context: implications for team learning and performance, Academy of Management Journal, Vol. 49, pp