Managing for innovation: Managerial control and employee level outcomes

JBR-08121; No of Pages 9 Journal of Business Research xxx (2014) xxx–xxx

Contents lists available at ScienceDirect

Journal of Business Research

Managing for innovation: Managerial control and employee level outcomes Mathew R. Allen a,⁎, Gordon K. Adomdza b,1, Marc H. Meyer b,2 a b

Entrepreneurship Division, Babson College, Blank 105, 231 Forest Street, Babson Park, MA 02457, United States Northeastern University, 360 Huntington Avenue, Boston, MA 02115, United States

a r t i c l e

i n f o

Article history: Received 9 July 2012 Received in revised form 18 June 2014 Accepted 19 June 2014 Available online xxxx Keywords: Innovation Managerial control Corporate entrepreneurship Strategic human resource management

a b s t r a c t Considerable effort is made by organizations to increase long-term firm performance through innovation. Despite the emphasis on innovation as a source of renewal, relatively little is known about the effective management of human resources supporting innovation efforts. Prior research supports a negative impact of managerial control on the motivation of employees. Following on recent theoretical developments, we argue that the impact of managerial control will differ based on the type of knowledge being used. Using data from 104 members of product development teams working on new product development or current product management, our findings suggest that the use of control can have differing effects on motivation depending on the attributes of the knowledge involved. Specifically, tests of moderation indicated the negative impact of control on employee motivation is much greater when the knowledge being used is less complete (those working on the development of new products). © 2014 Published by Elsevier Inc.

1 . Introduction The development of new products and services through innovation is increasingly seen as an essential tool for sustained organizational performance (Covin & Miles, 2007; Zahra & Covin, 1995). This process of renewal through innovation is often referred to as corporate entrepreneurship (Phan, Wright, Ucbasaran, & Tan, 2009) and organizations are increasing efforts to build capabilities in this area (Hayton & Kelley, 2006). While a significant amount of research has addressed strategies leading to effective innovation within established organizations (Covin & Miles, 2007; Hayton & Kelley, 2006), less is known about the use of management practices in motivating appropriate attitudes and behaviors from employees involved in this effort (Marvel, Griffin, Hebda, & Vojak, 2007). One such management practice that is of particular interest in influencing innovation is that of managerial control (Mcgrath, 2001). Strategic human resource management (SHRM) theories argue that employee behavior in support of organizational strategies is dependent on employees having the necessary abilities, motivation and opportunity (Kaifeng, Lepak, Jia, & Baer, 2012). Managerial control is seen as inhibiting employee motivation and reducing employee opportunity (Gagné & Deci, 2005). Higher levels of control exercised by managers inhibit employees' ability to use their discretion to apply knowledge and skills to the needs of the organization (Deci, Connell, & Ryan, 1989).

⁎ Corresponding author. Tel.: +1 781 239 4296. E-mail addresses: [email protected] (M.R. Allen), [email protected] (G.K. Adomdza), [email protected] (M.H. Meyer). 1 Tel.: +1 617 373 6028. 2 Tel.: +1 617 373 5948.

Thus, reduced managerial control (increased levels of autonomy) is seen as an important component of high performance and high commitment work systems (Batt, 2002; Huselid, 1995; Wright, Gardner, Moynihan, & Allen, 2005). Similarly, the entrepreneurship literature supports the argument that managerial control can inhibit entrepreneurial initiative on the part of employees with employee autonomy representing an important component of entrepreneurial orientation (Lumpkin, Cogliser, & Schneider, 2009). A contrasting viewpoint supports a contingency perspective arguing that the efficacy of managerial control in eliciting desired attitudes and behaviors is contingent on the attributes of the knowledge involved (Turner & Makhija, 2006). Where the knowledge utilized is more complete and readily available, managerial control of employee behaviors and activities is argued to be more effective. Control where the knowledge utilized is less complete would not be as effective (Turner & Makhija, 2006). These potentially differing viewpoints have specific implications for the management of employees involved in entrepreneurship within established organizations. Product management includes a broad range of innovation from the development of completely new products or services where knowledge would be less complete to the management of existing products where knowledge would be much more complete (Christensen, 1997; Covin & Miles, 2007; Kuratko & Audretsch, 2009; Meyer, 2007). Given the importance of individual employee behaviors and attitudes to these efforts (Burgelman, 1983; Chen & Huang, 2009), it is important for researchers and practitioners alike to understand the conditions under which managerial control might support or deter the motivation of desired attitudes and behaviors from employees. The purpose of this paper is to understand the role of

http://dx.doi.org/10.1016/j.jbusres.2014.06.021 0148-2963/© 2014 Published by Elsevier Inc.

Please cite this article as: Allen, M.R., et al., Managing for innovation: Managerial control and employee level outcomes, Journal of Business Research (2014), http://dx.doi.org/10.1016/j.jbusres.2014.06.021

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M.R. Allen et al. / Journal of Business Research xxx (2014) xxx–xxx

managerial control in motivating desired attitudes and behaviors among employees involved in innovation efforts within established organizations and more specifically to understand the role that the attributes of the knowledge involved play in defining that relationship. 2 . Theory and hypothesis 2.1 . Managerial control The level of control that managers exercise over employees has long been considered an integral component of effective employee management (Hackman & Oldham, 1976). From the standpoint of SHRM, employee autonomy is generally included in high performance or high involvement work systems (Batt, 2002; Wright, Dunford, & Snell, 2001). According to SHRM theory, the effective management of human capital is comprised of two components. The first involves the development of superior human capital in the form of knowledge skills and abilities (Becker, 1964; Huselid, 1995). The second involves practices that both allow and motivate employees to utilize those skills effectively (Wright et al., 2001). In order for employees to effectively contribute to the needs of the organization, they must have ability in the form knowledge and skills, motivation in the form of appropriate incentives and opportunity in the form of sufficient autonomy to apply their knowledge and skills appropriately (Kaifeng et al., 2012). Managerial control or control of work processes tends to reduce motivation and limit employees' ability to apply their human capital to the needs of the organization (Schuler & Jackson, 1987). The ability to make decisions regarding day to day tasks has long been considered a motivating factor in work design (Hackman & Oldham, 1980) and is a key component of intrinsic motivation (Deci et al., 1989). Batt (2002) found that increased autonomy on the part of call center employees was an important component of firm performance. Employees were empowered to use their knowledge to solve problems and create innovative solutions. Alternatively, control of work activities has been associated with reduced trust in management (Collins & Smith, 2006; Mayer, Davis, & Schoorman, 1995), and low motivation and commitment (Batt, 2002; Collins & Smith, 2006) and higher turnover (Batt, 2002). In addition to reduced opportunity, managerial control implies a lack of trust in the ability of employees (Mayer & Gavin, 2005). This perceived lack of trust from managers is then reciprocated creating a lack of trust in management, inhibiting the establishment of exchange relationships between employees and their leaders and reducing motivation and performance (Walumbwa, Cropanzano, & Goldman, 2011; Wayne, Shore, & Liden, 1997) In addition to human resource management theories, entrepreneurship theories also argue that managerial control inhibits behaviors and attitudes supportive of entrepreneurial efforts (Ireland, Hitt, & Sirmon, 2003). Autonomy is considered an integral part of entrepreneurial orientation (Lumpkin et al., 2009) and supports the ability of individuals to act outside of organizational norms, a key component of successful entrepreneurship (Burgelman, 1983; Dess, Lumpkin, & Covin, 1997). As constraints on behavior imposed by control decrease, employees possess greater discretion to pursue entrepreneurial opportunities (Ireland et al., 2003). This is important because many of these opportunities exist outside the normal scope of business operations and require development of new knowledge or capabilities (Mcmullen & Shepherd, 2006). Accordingly, decreased managerial control has been associated with innovation, the launching of new ventures and increased competitiveness (Lumpkin et al., 2009). It is clear that a lack of managerial control is an important component of effective human resource management with additional implications for entrepreneurship. We argue that managerial control will inhibit efforts to elicit important employee attitudes and behaviors. Specifically, we argue that increased managerial control will be associated with decreased citizenship behaviors, increased turnover intentions and decreased levels of trust in management on the part of employees.

2.2. Organizational citizenship behaviors One key behavior related to successful innovation within organizations is a willingness on the part of employees to exert effort beyond typical job descriptions. This effort, often described as organizational citizenship behaviors, represents discretionary behaviors on the part of employees that fall outside the formal job requirements and compensation structures of the organization, but contribute to performance (Smith, Organ, & Near, 1983). Citizenship behaviors have been shown to contribute to higher levels of performance (Coyle-Shapiro, Kessler, & Purcell, 2004; Li-Yun, Aryee, & Law, 2007; Smith et al., 1983). As employees extend their effort beyond what job responsibilities require, the organization benefits in the form of increased productivity and performance (Podsakoff, Ahearne, & Mackenzie, 1997). Employees also benefit in the form of increased motivation and job satisfaction (Koys, 2001). Researchers have argued that the discovery and development of entrepreneurial opportunities are dependent on the willingness of individuals to operate outside normal functions and processes within the organization (Lumpkin et al., 2009). While citizenship behaviors are important in many business contexts, they are especially important in innovation efforts where the ambiguity of the situation requires employees to be more proactive in applying their human capital compared to stable environments (Keil, Mcgrath, & Tukiainen, 2009; Schuler & Jackson, 1987). Researchers have demonstrated that increased managerial control can lead to decreased citizenship behaviors from employees in more standard work roles (Chen & Chiu, 2009; Li-Yun et al., 2007). The implication of lower levels of citizenship behaviors in the context of innovation efforts is lower performance and effort on the job including less willingness to work outside prescribed job roles which can significantly impact the success of entrepreneurial activities (Benkhoff, 1996). Accordingly, we argue that high levels of managerial control will reduce citizenship behaviors from employees in general including those involved in entrepreneurial activities. Hypothesis 1. Managerial control will be negatively related to employee citizenship behaviors. 2.3. Turnover intentions A key employee attitude in effective corporate entrepreneurship is a long-term commitment to the organization as demonstrated by a willingness to remain with the company. Success in innovation requires the ability to build related internal capabilities (Hayton & Kelley, 2006) including the development of specific skill sets and talent among employees (Becker, 1964; Lisboa, Skarmeas, & Lages, 2011). This requires a longer term commitment from employees because development of these capabilities takes time and is at least partially dependent on employees remaining committed to the company over time (Keil et al., 2009). Turnover can be detrimental to capability building efforts (Kacmar, Andrews, Van Rooy, Steilberg, & Cerrone, 2006; Shaw, Duffy, Johnson, & Lockhart, 2005). As employees choose to leave the organization, they take with them key pieces of knowledge and learning, the replacement of which takes both time and effort (Shaw et al., 2005). High levels of managerial control inhibit the ability of employees to utilize their human capital and in turn gain satisfaction from their work (Deci et al., 1989). This can be especially true among employees involved in entrepreneurial activities where innovation and creativity are required. These lower levels of satisfaction will decrease commitment to the company and increase desires to seek out alternative employment. Thus we argue that managerial control will increase employee intentions to leave the organization including those involved in innovation. Hypothesis 2. Managerial control will be positively related to turnover intentions among employees.

Please cite this article as: Allen, M.R., et al., Managing for innovation: Managerial control and employee level outcomes, Journal of Business Research (2014), http://dx.doi.org/10.1016/j.jbusres.2014.06.021

M.R. Allen et al. / Journal of Business Research xxx (2014) xxx–xxx

2.4. Trust in management Another important employee attitude related to effective corporate entrepreneurship is trust in management (Batt, 2002; Schoorman, Mayer, & Davis, 2007). Trust has been defined as a willingness to put oneself at risk in relation to another (Mayer et al., 1995). A willingness to take risks is an important component of the entrepreneurial process due to the dynamic nature and riskiness of innovation activities (Lumpkin et al., 2009). Low trust in management can result in a reduced willingness to take risks and utilize human capital (Colquitt, Scott, & Lepine, 2007; Davis, Schoorman, Mayer, & Hwee Hoon, 2000) resulting in lower performance in innovation efforts. Employees who do not feel that management is looking out for their interests will be less likely to fully engage in risky activities related to creativity and innovation (Mayer et al., 1995). Marvel et al. (2007) found that employees involved in entrepreneurial activities do not generally have confidence in their managers for continued support in the event of project failure. Thus, trust in management is an important component of successful entrepreneurial efforts. Employee discretion or lower levels of control from management can be perceived as a demonstration of trust and confidence in the employee on the part of management. This demonstration of trust will result in higher levels of trust in management on the part of employees through reciprocation (Schoorman et al., 2007). Conversely, as management constricts autonomy through high levels of managerial control, employees perceive this lack of discretion as an indication of low levels of trust from management resulting in lower reciprocal trust from employees (Mayer et al., 1995; Schoorman et al., 2007). We argue that managerial control will reduce the level of trust in management on the part of employees including those involved in innovation. Hypothesis 3. Managerial control will be negatively related to trust in management on the part of employees.

2.5. Knowledge completeness as a key contingency While SHRM and entrepreneurship theories predict that managerial control should have a negative effect on employee attitudes and behaviors, recent arguments propose that this relationship might be dependent on the nature of the knowledge being utilized (Turner & Makhija, 2006). Of particular interest to this study are recent arguments that because control systems affect the flow of knowledge within an organization, the effectiveness of control systems will vary depending on the attributes of the knowledge needed (Turner & Makhija, 2006). Specifically, Turner and Makhija (2006) argued that the control mechanisms used to manage employees will differ in effectiveness based on the codifiability, completeness and diversity of the knowledge used. Where the knowledge used is codifiable, complete and less diverse, a focus on control of the process with specific control of employee behaviors and activities is recommended (Turner & Makhija, 2006). Where the knowledge required is less codifiable, less complete and more diverse, less formal control structures that do not impose structure on the specific behaviors and activities of employees are recommended (Turner & Makhija, 2006). The idea that knowledge attributes such as declarative vs. procedural (Motowildo, Borman, & Schmit, 1997), general vs. specific (Becker, 1964, 1993) and tacit vs. explicit (Grant, 1996) can explain behavioral as well as strategic outcomes and decisions within organizations is well established in the literature. The specific idea that knowledge attributes can explain contingent effects of managerial control efforts is also is in keeping with prior research (Blanchard, Zigarmi, & Nelson, 1993; Osborn & Hunt, 1974; Sims, Faraj, & Yun, 2009). Specifically, situational leadership (Blanchard et al., 1993; Johansen, 1990) argues that the effectiveness of managerial leadership styles (support vs. task) is dependent on the situation. One important situational variable described in situational leadership is the ability of the individual being managed

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(Johansen, 1990). Thus, effective leaders should adapt their level of control based on the level of knowledge possessed by the employee (Blanchard et al., 1993). These arguments provide further support for the idea that the effectiveness of control should be contingent on the attributes of the knowledge being used. Of particular importance to this discussion is the completeness of the knowledge available. Completeness refers to the sufficiency and availability of necessary knowledge (Turner & Makhija, 2006). Knowledge completeness exists in situations of stability and predictability where attributes of the knowledge required for decision making do not vary over time (Snell & Youndt, 1995). Knowledge incompleteness occurs in situations that are less stable and predictable where the attributes of the knowledge required for decision making changes over time. Incompleteness of knowledge implies that additional knowledge is needed in order to accomplish the goals of the organization. This knowledge, by definition, will need to be created or sourced from outside the organization (Turner & Makhija, 2006). The management and development of existing product portfolios involves the use of knowledge that is currently available within the organization. These products and services involve the use of understood technologies focused on known markets. Processes for managing these portfolios tend to be stable and the knowledge needed predictable. This is not the case with the development of new products or services through entrepreneurial efforts. Because the offerings are new, the knowledge needed for their development does not exist within the organization. The effective development of these innovations requires creating or obtaining new technological and market knowledge (Pérez-Luño, Cabello Medina, Carmona Lavado, & Cuevas Rodríguez, 2011). Following on the above arguments, the differences in the completeness of the knowledge between current product management and new product development will result in differences in the effectiveness of managerial control systems (Snell & Youndt, 1995; Turner & Makhija, 2006). Where the knowledge required is more complete, as is the case with current product management, direct control by management on the activities and behaviors of employees should be more effective (Turner & Makhija, 2006). Knowledge completeness implies a clearer understanding of the specific processes necessary for success, thus supporting the use of this more direct control. When the knowledge required is less complete, as is the case with the development of new products or services, the use of direct control over the specific activities and behaviors of employees should be less effective (Pérez-Luño et al., 2011; Turner & Makhija, 2006). This is because there is little understanding of the specific processes needed for success and the knowledge needed to understand these processes will likely have to be created or sourced from outside the organization. Following on the above logic, we argue that the effect of managerial control on the behaviors and attitudes of employees will differ based on the completeness of the knowledge involved. Specifically, the negative effect will be greater for employees that are involved in projects requiring the use of incomplete knowledge where the development of new technology for new markets is involved (new product development). The lack of complete knowledge necessary for carrying out tasks such as how a new technology might apply to meeting customer needs, or how an unknown customer set might react to the introduction of a new product will require employees to experiment and learn through the acquisition or development of knowledge not currently available to the organization (Ravasi & Turati, 2005). Under these conditions of incomplete knowledge, efforts on the part of management to place controls on the day to day behaviors and activities of employees will be in opposition to the learning and experimentation needed to acquire the necessary knowledge and will result in frustration on the part of the employees. Hypothesis 4. The effect of managerial control on organization citizenship behaviors among employees will be greater when the knowledge used is less complete relative to the organization (new product development).

Please cite this article as: Allen, M.R., et al., Managing for innovation: Managerial control and employee level outcomes, Journal of Business Research (2014), http://dx.doi.org/10.1016/j.jbusres.2014.06.021

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M.R. Allen et al. / Journal of Business Research xxx (2014) xxx–xxx

Hypothesis 5. The effect of managerial control on turnover intentions among employees will be greater when the knowledge used is less complete relative to the organization (new product development). Hypothesis 6. The effect of managerial control on trust in management among employees will be greater when the knowledge used is less complete relative to the organization (new product development).

3 . Method 3.1 . Sample and procedures Due to the exploratory nature of this study, both qualitative and quantitative methods were employed. The first part of the study involved the collection of qualitative data in order to inform the study. Semi-structured interviews were conducted with managers and employees involved in innovation efforts within several organizations. The purpose of these interviews was to better understand desired employee behaviors as well as factors that might contribute to or impede these behaviors within this environment. The results of these semistructured interviews informed the research questions and the development of the survey instrument. In the next step a sample of employees involved in current product management and new product development efforts were surveyed. Ten large, established organizations were chosen based on knowledge that these companies were involved in both current product management and new product development and would be able to provide an appropriate sample consisting of members from each group for the purposes of this study. The firms were also chosen in part because of personal contacts with the researchers. The advantage being that we had direct knowledge of the entrepreneurial activities and an increased willingness on the part of the organizations to actively participate and provide accurate feedback (Mcgrath, 2001). Firms participating in the study represented a diverse set of industries from consumer products to software to healthcare. Only employees directly involved in the management and development of products (either current or new) were invited to participate. In addition, participants included only front line employees and their immediate supervisors in an effort to represent the individual players working on the day to day activities involved rather than higher level decision makers. Participating organizations were asked to provide contact information in the form of names and email addresses both for employees within their organizations involved in the management of current, established products as well as employees involved in the development of new products. This contact information was used for the purpose of disseminating the survey instrument. Emails were sent to a total of 193 employees from the organizations mentioned above. The email contained an invitation and explanation of the study as well as a link to the survey instrument. Responses were received from 111 employees. After accounting for missing data resulting from incomplete responses 104 complete surveys were available and used for analysis representing a response rate of 54%. No substantive information about non-respondents was available and as a result, we were not able to test for response bias in the sample. However, the relatively high response rate for the survey increases the likelihood that the responses are representative of the sampled population. 3.2 . Measures 3.2.1. Managerial control Managerial control was measured as control of employee behavior and activities or process control (Turner & Makhija, 2006). This measure was adapted from Hackman and Oldham (1980). Items were adapted in order to capture the level to which management defined work schedules and processes used to carry out work assignments. The three

Likert-type items asked respondents to indicate their agreement with statements regarding the level of managerial control of work schedule and processes. Possible responses ranged from strongly disagree to strongly agree. The items included in the measure are: “the manager for this team closely monitors the day to day activities of employees”, “the manager for this team tightly controls the pace and schedule at which employees complete their work” and “Employees on this team are given discretion to complete their tasks however they see fit” (reverse coded). All three items factored cleanly and reliability was acceptable with a Cronbach alpha of .74. 3.2.2. Turnover intentions Turnover intentions were measured using a three item scale adapted from Schaubroeck, Cotton, and Jennings (1989) used to capture employees' intent to leave the organization (Golden, Veiga, & Dino, 2008). The 5 point Likert-type items measured the extent to which employees felt they or their team members were considering and or actively in the process of leaving the organization. Respondents were asked to indicate the extent to which they agreed with statements regarding turnover intentions ranging from strongly disagree to strongly agree. Turnover intentions items were: “employees on this team will actively seek a new employer within the next year”, “employees on this team often think about quitting the company” and “employees on this team will leave the company within the next year”. All three items factored cleanly and reliability was acceptable with a Cronbach alpha of .71. 3.2.3. Organization citizenship behaviors The organization citizenship behavior measure was adapted from a measure created by Smith et al. (1983) and converted to an employee report format by Pond Iii, Nacoste, Mohr, and Rodriguez (1997). The measure consisted of 4 items. The 5 point Likert-type items asked respondents to indicate the extent to which they agreed with statements regarding citizenship behaviors on their team. Items were scaled from strongly disagree to strongly agree. Items for the organization citizenship measure included: “Employees on this team will stay overtime to finish a project even if they are not paid for it”, “Employees on this team avoid taking on extra duties and responsibilities at work” (reverse coded), “People on this team often do extra work which is not part of their job”, and “The people on this team are very much personally involved in their work”. The 4 items factored cleanly and demonstrated acceptable reliability with a Cronbach alpha of .89. 3.2.4. Trust in management Trust in management was measured using a 4 item scale adapted from a scale by Schoorman et al. (2007). Following Mayer et al. (1995) the scale measured the extent to which respondents trusted management within their organizations. Respondents indicated their level of agreement with statements regarding their trust in management on a 5 point Likert-type scale ranging from strongly disagree to strongly agree. Items for the trust measure included: “my manager keeps my interests in mind when making decisions”, “I feel comfortable being creative because my manager understands that sometimes creative solutions do not work”, “If my manager asked why a problem occurred, I would speak freely even if I were partly to blame”, and “If I had my way, I wouldn't let my manager have any influence over decisions that are important to me” (reverse coded). The items factored cleanly and demonstrated acceptable reliability with a Cronbach alpha of .74. 3.2.5. Knowledge completeness or new product development vs. current product management As discussed previously, the sample, by design, contained both employees working on current product management and those working on new product development. Following theoretical assumptions (Snell & Youndt, 1995; Turner & Makhija, 2006) qualitative interviews indicated that those working on current product management have access to more complete knowledge while those working on the

Please cite this article as: Allen, M.R., et al., Managing for innovation: Managerial control and employee level outcomes, Journal of Business Research (2014), http://dx.doi.org/10.1016/j.jbusres.2014.06.021

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development of new products worked under conditions of less complete knowledge. Further, based on the qualitative interviews with participating organizations it was suggested that all new product development efforts are focused on either the use of technologies that were new to the organization or markets that are new to the organization or both. In contrast, current product management efforts are based on technologies that are known to the organization and markets already being served by the organization. The measure for knowledge completeness was based on these findings from the qualitative interviews. Specifically, knowledge completeness (whether or not the employee was working on new product development) was measured using two categorical variables regarding both the technology and intended market of the project on which the employee was currently working. Respondents were asked to indicate whether their project represented new technology vs. an extension of technology previously used by the organization. In addition, respondents were asked whether the intended market of their project represented a new market from the organization standpoint vs. a market which the organization was currently serving. The use of either a new technology or the targeting of a new market indicates that the focus of the employee is on new product development where the knowledge used is less complete. Employee responses were coded as a 1 where the project they were working on represented new technology or new markets (employees working on new product development) and −1 where the project represented the use of knowledge more familiar to the organization and thus much more complete in nature (employees working on current product management). 3.2.6. Interaction term The interaction term was created by multiplying the knowledge completeness measure with managerial control. Managerial control was standardized prior to the creation of the interaction variable in order to minimize problems with multicolinearity. 3.2.7. Control variables We included several control variables that are likely to be associated with both the independent and dependent variables. We controlled for industry using five dummy variables representing the major industries of the products and services represented in our sample which included; consumer products, computer storage, software, wholesale distribution and healthcare. Industry descriptions were provided by respondents and confirmed through external analysis of the companies. Having managerial responsibilities can also impact both the perception of managerial control as well as motivation of attitudes and behaviors (Campbell & Campbell, 2003). We control for managerial responsibilities using a dummy variable where 1 indicates that the employee has responsibilities for the management or supervision of others and a 0 for no managerial responsibility. Company tenure can also impact perceptions of management and employee outcomes. We controlled for company tenure measured as the number of years the employee has been working for the company. Finally, research has demonstrated that other HRM practices work in combination in influencing employee behaviors (Huselid, 1995). These other components of HPWS such as performance based compensation or selective hiring can have a significant impact on employee outcomes as multiple human capital management practices can be related to each other in a systematic way (Batt, 2002). Thus we controlled for the effects of both compensation and selection. We controlled for performance based compensation using a dummy variable coded 1 for the existence of performance based compensation and a 0 for its absence. We controlled for selective hiring using a 3 item measure for selective hiring. The 5 point Likert-type items measured the extent to which the company hired employees based on their fit with the organization by asking respondents to indicate their agreement with statements regarding

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hiring for fit. The three items factored cleanly and demonstrated acceptable reliability with a Cronbach alpha of .85. 3.2.8. Common method variance Because the dependent and independent variables were reported by the same individual, we acknowledge that common method bias may be present (Podsakoff, MacKenzie, Lee, & Podsakoff, 2003). In order to address this issue, we followed Harman's one-factor test (Podsakoff et al., 2003) by entering the self-reported dependent and independent variables in a factor analysis with principal axis factoring and varimax rotation, to determine whether one factor accounts for the majority of the covariance among measures. Four factors emerged with eigen values greater than 1. No single factor was dominant with the first factor accounting for 22% of 67% variance explained by the four factors increasing our confidence that common method issues did not severely impact our findings (see Table 1). 4 . Results Table 2 provides descriptive statistics and correlations for the study variables. We tested the hypotheses using ordinary least squares regression. Step one included all control variables. In step two we entered managerial control in order to test for the direct effects of managerial control on employee outcomes (Hypotheses 1–3). Step 3 included the addition of the interaction term in order to test for the moderating effect of knowledge completeness (Hypotheses 4–6). Hypothesis 1 argued for a negative relationship between managerial control and employee citizenship behaviors. The relationship was negative and significant (β = − .25, p b .01). Thus Hypothesis 1 was supported. Hypothesis 2 argued for a positive relationship between managerial control and turnover intentions among employees. Hypothesis 2 was not supported (β = −.19 p = n.s.). Hypothesis 3 suggested a negative relationship between managerial control and trust in management. This relationship was not significant (β = .10 p = n.s.). Thus Hypothesis 3 was not supported (see step 2 in Table 3). Next we examined whether managerial control and the completeness of the knowledge involved interacted in predicting employee outcomes. This was done by entering the interaction term in step three of the regressions (see Table 3). Hypothesis 4 predicted that the effect of managerial control on organization citizenship behaviors would be greater when the knowledge used was less complete in nature. As expected, the interaction term was both negative and significant (β = −.29, p b .01). Fig. 1 plots the high and low knowledge completeness conditions and demonstrates a negative relationship between managerial control and organizational citizenship behaviors when knowledge is less complete compared to a positive relationship when knowledge was more complete. Thus Hypothesis 4 was supported. Hypothesis 5 argued that the positive effect of managerial control on turnover intentions would be greater when knowledge was less Table 1 Factor loadings for independent and dependent variables.

Managerial control 1 Managerial control 2 Managerial control 3 Trust 1 Trust 2 Trust 3 Trust 4 Turnover intentions 1 Turnover intentions 2 Turnover intentions 3 Citizenship 1 Citizenship 2 Citizenship 3 Citizenship 4

Factor 1

Factor 2

Factor 3

Factor 4

.025 −.041 −.092 .109 .170 .175 −.001 .074 −.059 −.124 .905 .863 .836 .866

.009 .038 .115 .758 .823 .798 .578 .102 −.279 −.074 .119 .051 .172 .110

.726 .877 .791 .284 .041 −.105 .037 −.062 −.120 −.059 −.135 .045 −.027 −.016

−.181 −.019 −.024 −.130 .099 .005 −.202 .822 .743 .758 .037 −.100 −.085 .019

Please cite this article as: Allen, M.R., et al., Managing for innovation: Managerial control and employee level outcomes, Journal of Business Research (2014), http://dx.doi.org/10.1016/j.jbusres.2014.06.021

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Table 2 Means, standard deviations, reliabilities, and correlations among study variables.a Variable

Mean

s.d.

1

2

3

4

5

6

7

8

9

10

11

12

13

1. Consumer products 2. Storage 3. Software 4. Wholesale/distribution 5. Health/other 6. Managerial responsibility 7. Company tenure 8. Knowledge completeness 9. Variable compensation 10. Selection for fit 11. Turnover intentions 12. Trust in manager 13. Citizenship behaviors 14. Managerial control

0.27 0.25 0.30 0.10 0.09 0.65 2.92 0.40 0.63 3.55 2.79 3.71 3.97 2.78

0.45 0.44 0.46 0.30 0.28 0.48 1.00 0.49 0.48 0.89 0.77 0.65 0.67 0.83

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(.35)⁎⁎ (.40)⁎⁎ (.20)⁎ (19) .17 .00 43⁎⁎ .24⁎ .11 .11 .05 .08 .04

(.38)⁎⁎ (19) (18) .05 .05 .02 .39⁎⁎ .11 (.05) (.04) .12 .07

(.21)⁎ (.20)⁎ (.01) .07 (.32)⁎⁎ (.42)⁎⁎ (.03) (.21)⁎ .10 .14 (.05)

(.10) (.17) .03 (.14) (.29)⁎⁎ (.23) ⁎ .18 (.15) (.37)⁎⁎ (.25)⁎⁎

(.14) (.22)⁎ (.04) .02 (.05) .06 (.02) (.15) .18

.25⁎ .27⁎⁎ .25⁎ .10 (11) .19 .18 .05

(.02) (.08) (11) (.09) .06 .09 .01

.34⁎⁎ .04 .09 .03 .08 .05

.22 ⁎ .01 .12 .30⁎⁎ .26⁎⁎

(.10) .25⁎⁎ .22⁎ .13

(18) (.13) (.19)⁎

.28⁎⁎ .15

(.10)

⁎ p b .01. ⁎⁎ p b .05, n = 104.

complete. Though the direct effect of control on turnover intentions was not significant, the interaction term was positive and significant (β = .26, p b .05) indicating that the effect of managerial control on turnover was indeed more positive when the knowledge involved was less complete. Fig. 1 plots the simple slopes of the high and low knowledge completeness conditions and demonstrates a negative relationship between control and turnover intentions when knowledge was more complete, and a small positive effect when knowledge was less complete. Though the direct effects were contrary to what was expected, Hypothesis 5 was supported. Hypothesis 6 predicted that the effect of managerial control on trust in management would be greater when knowledge was less complete. As expected, the interaction term was both negative and significant (β = − .46, p b .01). Fig. 1 plots the high and low knowledge completeness conditions and demonstrates a negative relationship between managerial control and trust in management when knowledge is less complete compared to a positive relationship for more complete knowledge. Thus Hypothesis 6 was supported. 5 . Discussion In this paper we tested the direct effects of managerial control of work processes on employees involved in current product management and

new product development. Our findings indicate that the effect of managerial control on the attitudes and behaviors of employees is more complex than might be indicated by SHRM or entrepreneurial orientation theories. While the hypothesis regarding the negative impact of managerial control on employee organization citizenship behaviors was supported, there was no support for the direct effects hypothesized between control and trust in management or control and turnover intentions. Further analysis of interactions provides additional insight into the relationship. We tested hypotheses addressing differences in the effect of managerial control based on the completeness of the knowledge used relative to the organization. The results provide stark insights into the role that knowledge attributes play in moderating the relationship between managerial control and employee outcomes. In each case the effect of managerial control differed significantly based on the completeness of the knowledge being used. The effect of managerial control in the situation of more complete knowledge (current product management) was contrary to what might be expected based on prior SHRM research (Batt, 2002; Hackman & Oldham, 1980). Prior SHRM research has looked at autonomy as an important component of high performance work systems and argued that control of employee work processes has a negative effect on employee behaviors. Results from this research indicate that the effect of managerial control on employees is more situational and depends on the type of knowledge involved. The use of

Table 3 Results of regression analysis.a. Variables

Controls Storage Software Wholesale/distribution Health/other Managerial responsibility Company tenure Knowledge completeness Variable compensation Selection for fit Direct effects Managerial control Moderation Knowledge completeness × managerial control F change Change R2 Total R2

Citizenship behaviors

Turnover intentions

Trust in management

Step 1

Step 2

Step 3

Step 1

Step 2

Step 3

Step 1

Step 2

Step 3

0.00 0.19 −0.22† −0.11 0.03 0.08 −0.01 0.30⁎ 0.11

−0.01 0.19 −0.26⁎ −0.07 0.02 0.10 −0.02 0.36⁎⁎ 0.12

−0.03 0.21† −0.24⁎ −0.06 0.04 0.10 −0.02 0.38⁎⁎ 0.12

−0.11 −0.22 0.09 −0.03 −0.09 −0.06 0.05 0.00 −0.08

−0.11 −0.22 0.05 0.01 −0.09 −0.05 0.05 0.05 −0.06

−0.10 −0.23 0.04 0.00 −0.10 −0.04 0.04 0.02 −0.06

−0.08 0.11 −0.03 0.02 0.13 0.07 −0.02 0.12 0.23⁎

−0.08 0.11 −0.01 0.01 0.14 0.06 −0.02 0.09 0.22⁎

−0.11 0.14 0.02 0.02 0.16 0.05 −0.02 0.13 0.21⁎

−0.25⁎⁎

−0.07

−0.19†

−0.34⁎⁎

3.15† 0.03 0.12

0.26⁎ 4.52⁎ 0.04 0.16

3.48⁎⁎ 0.25 0.25

7.25 ⁎⁎ 0.05 0.30

−0.29⁎⁎ 7.61⁎⁎ 0.05 0.36

1.06 0.09 0.09

1.41 0.12 0.12

0.10

0.38⁎⁎

0.91 0.01 0.13

−0.46⁎⁎ 16.21⁎⁎ 0.13 0.26

a

n = 104. Standardized regression coefficients are shown. p b .10. ⁎ p b .05. ⁎⁎ p b .01. †

Please cite this article as: Allen, M.R., et al., Managing for innovation: Managerial control and employee level outcomes, Journal of Business Research (2014), http://dx.doi.org/10.1016/j.jbusres.2014.06.021

M.R. Allen et al. / Journal of Business Research xxx (2014) xxx–xxx

7

Interaction Effects of Knowledge Completeness 5

Citezenship Behaviors

4.5 4

3.5

High Knowledge Completeness

3

2.5 Low Knowledge Completeness

2 1.5

1 Low Managerial control

High Managerial control

5

Turnover Intentions

4.5 4

3.5

High Knowledge Completeness

3 Low Knowledge Completeness

2.5 2 1.5

1 Low Managerial control

High Managerial control

5

Trust in Management

4.5 4

3.5

High Knowledge Completeness

3

Low Knowledge Completeness

2.5 2 1.5

1 Low Managerial control

High Managerial control

Fig. 1. Interaction effects of knowledge completeness.

managerial control in situations involving more complete knowledge was negatively related to turnover intentions and positively related to both citizenship behaviors and trust in management (see Fig. 1). Interestingly, the effect of managerial control changed in the situation of less complete knowledge where managerial control was positively related to turnover intentions and negatively related to both citizenship behaviors and trust (Fig. 1). Visibly the completeness of the knowledge required plays a significant role in determining the appropriate level of managerial control in seeking to influence employee attitudes and behaviors. This is important because prior research supports a consistently positive relationship between lower levels of managerial control and employee outcomes

and theory suggests this relationship should be similar when addressing innovation within established organizations (Lumpkin et al., 2009; Ton & Huckman, 2008). The findings provide support for arguments that have been made, but not yet tested regarding knowledge attributes and appropriate control mechanisms (Turner & Makhija, 2006). At a broader level, these findings support arguments for the importance of understanding the human capital aspects of innovation efforts at the employee level (Marvel et al., 2007). Clearly the way in which organizations manage their human capital in the context of innovation efforts has implications for important outcomes such as turnover, citizenship behaviors, and trust. This study supports the use of variations in behavior based managerial control depending on the type of

Please cite this article as: Allen, M.R., et al., Managing for innovation: Managerial control and employee level outcomes, Journal of Business Research (2014), http://dx.doi.org/10.1016/j.jbusres.2014.06.021

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M.R. Allen et al. / Journal of Business Research xxx (2014) xxx–xxx

work the employee is doing. Specifically, employees working on the management of existing products and services seem to be effectively motivated or at least minimally impacted by managerial control focused on monitoring and controlling day to day activities and behaviors while employees working on new product development are negatively impacted by the same control system. Organizations that are better able to adapt their human capital management practices to meet the specific situation should experience lower levels of turnover, and higher levels of citizenship behaviors and trust among employees. 5.1 . Limitations and future research These findings should be understood in light of certain limitations resulting from the design and sample used for this study. First, as mentioned previously, responses used for this study came from a single source, namely individual employees and managers involved in either new product development or current product management. Though efforts were made to mitigate the effects of any bias resulting from this fact, the potential for common method bias is still an issue and should be considered when interpreting the results. Future researchers should seek out samples where data can be collected from multiple sources or where more objective data can be used to validate perceptions of employees working in these areas. In addition, the organizations studied are only a small subset of the larger population of organizations involved in these activities. The sample here does represent corporations known to be involved in innovation efforts, but is not representative of all organizations involved in those activities. As a result, findings in this study cannot necessarily be generalized to all businesses. Future research should add to these findings by utilizing broader samples in order to better understand the generalizability of the findings in this study. Finally, while cause and effect is implied in this study, there is not sufficient evidence to prove causality between managerial control and the employee outcomes studied. Proving cause requires both that the causal event precedes the effect in time and that all alternative explanations for any discovered effects are ruled out (Cohen, Cohen, West, & Aiken, 2003). While we were able to use a number of control variables thought to impact both independent and dependent variables, it is difficult to say with certainty that we were able to rule out every alternative explanation for the discovered effects. Future researchers should look to strengthen these findings by designing studies such that other potential explanations can be ruled out. In addition, researchers should seek to use longitudinal analysis in order to provide greater evidence of the causal effect of managerial control. 6 . Conclusion In conclusion, the way in which human capital is managed does play an important role in the ability of organizations to motivate important behaviors and attitudes from their employees. Effective human resource management can contribute to lower turnover and higher levels of citizenship behaviors and trust among employees involved in innovation activities. Perhaps more important, the attributes of the knowledge used in these activities play an important role in understanding how managerial control can contribute to or detract from the desired employee outcomes. References Batt, R. (2002). Managing customer services: Human resource practices, quit rates, and sales growth. Academy of Management Journal, 45(3), 587–597. Becker, G. (1964). Human capital: A theoretical and empirical analysis, with special reference to education. Chicago: Chicago University Press. Becker, G. S. (1993). Nobel lecture: The economic way of looking at behavior. Journal of Political Economy, 101(3), 385. Benkhoff, B. (1996). Catching up on competitors: How organizations can motivate employees to work harder. International Journal of Human Resource Management, 7(3), 736–752.

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