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The Effect of Human Capital Management Practices on Breakthrough

Innovation (BI) in Large Firms

Article in Academy of Management Annual Meeting Proceedings · November 2013

DOI: 10.5465/AMBPP.2013.16663abstract

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IEEE TRANSACTIONS ON ENGINEERING MANAGEMENT
Organizational Conservatism, Strategic Human
Resource Management, and Breakthrough Innovation
Byungchul Choi, T. Ravichandran , and Gina Colarelli O’Connor
Abstract—Organizational leaders routinely note the critical im-
portance of human capital in enabling successful innovation out-
comes. However, strategic human resource management (SHRM)
practices, especially in large firms, often are not aligned with prac-
tices that facilitate breakthrough innovation (BI), where uncer-
tainty, ambiguity, and risk of failure are high. In this paper, draw-
ing from the motivation–opportunity–ability (MOA) framework,
we identify and delineate SHRM practices that are likely to af-
fect BI outcomes in firms. These include career risk mitigation,
extrinsic rewards (motivation), idea generation facilitation (oppor-
tunity), innovation talent development, and managerial ambidex-
terity development (ability). We theorize that while these SHRM
practices may directly affect BI outcomes, these effects are likely to
be modulated by the broader organizational context, specifically,
the degree of organizational conservatism. We test our hypotheses
using survey data collected from 79 U.S.-based multinational firms
and find that first, the impacts of career risk, extrinsic rewards,
and innovation talent development on BI outcomes vary with the
firm’s degree of conservatism. Second, developing ambidextrous
talent among middle managers positively influences BI outcomes,
irrespective of the firm’s level of conservatism. Overall, our study
provides a basic framework to understand how SHRM practices
can be leveraged to influence innovation under varying degrees of
conservatism in organizations.
Index Terms—Breakthrough innovation (BI), motivation–
opportunity–ability (MOA) framework, organizational conser-
vatism, strategic human resource management (SHRM).
I. INTRODUCTION
TTENTION to the phenomenon of breakthrough inno-
A vation (BI) has increased in recent decades among both
scholars and practitioners. It has been widely recognized that for
long-term survival, firms need to innovate persistently by recog-
nizing opportunities to deliver novel innovations to the market.
However, the high degree of uncertainty and risk embedded
in BI processes are frequently associated with project failures
and concommitant unpredictability in economic returns. While
Manuscript received July 11, 2016; revised May 15, 2017, November 3, 2017,
January 15, 2018, and April 15, 2018; accepted May 5, 2018. This work was
supported by the 2018 Hankuk University of Foreign Studies Research Fund.
Review of this manuscript was arranged by Department Editor N. Joglekar.
(The authors contributed equally to this work and the names are listed in no
particular order.) (Corresponding author: T. Ravichandran.)
B. Choi is with the School of Business, Hankuk University of Foreign Studies,
Seoul 02450, South Korea (e-mail:,bchoi@hufs.ac.kr).
T. Ravichandran and G. Colarelli O’Connor are with the Lally School
of Management, Rensselaer Polytechnic Institute, Troy, NY, USA (e-mail:,
ravit@rpi.edu; oconng@rpi.edu).
Color versions of one or more of the figures in this paper are available online
at http://ieeexplore.ieee.org.
Digital Object Identifier 10.1109/TEM.2018.2845343
0018-9391 © 2018 IEEE. Personal use is permitted, but republication/redistribution requires IEEE permission.
See http://www.ieee.org/publications standards/publications/rights/index.html for more information.
1
human capital has been viewed as key to successful BI, ef-
forts leveraging human capital to achieve successful innovation
outcomes are challenging [1], [2]. Identifying human resource
management (HRM) practices for increasing the probability of
BI, therefore, is the subject of great interest to scholars in both
the HRM and innovation disciplines.
To provide a systematic approach to understand the impact
of broad HRM practices on innovation-oriented behaviors, we
employ the motivation–opportunity–ability (MOA) framework,
which is widely used in HRM performance research [3]–[6]. The
MOA framework consists of three dimensions that lead people
to achieve targeted behaviors or organizational goals. Motiva-
tion pertains to the incentives to conduct targeted behaviors,
opportunity pertains to the contextual and situational mecha-
nisms that support or constrain targeted behaviors, and ability
pertains to the relevant skills and knowledge needed to conduct
targeted behaviors. Despite its widely acknowledged applicabil-
ity as a framework for HRM research, MOA has received only
limited attention in the innovation literature (with the exception
of Seimsen, Roth, and Balasubramanian [4]).This framework
provides a suitable theoretical lens for our study as it allows us
to identify specific HRM practices that can enable or impede
innovation-oriented behaviors among organizational members.
Amabile et al. [32] point out that the efficacy of instruments
and management practices for innovation largely depends on the
support of the entire organization. In particular, the tendency of
large and mature organizations to be conservative has been em-
phasized by researchers as one of the most salient organizational
aspects that impacts innovation outcomes [7], [8]. Given that BI
projects entail a high degree of risk and uncertainty, a certain
degree of tension between organizational conservatism and ef-
forts to facilitate BI can be anticipated. Hence, understanding
the implications of this tension for effective innovation manage-
ment is imperative to derive actionable guidelines for practice.
In the context of BI, for example, Erzurumlu et al. [9] show
that while the design characteristics of highly risky projects
(e.g., development feasibility and technical performance goals)
directly influence project valuation, these impacts vary with or-
ganization type (e.g., mature firms, startups, etc.), indicating that
organizational-level characteristics matter. Yet this issue has not
been widely explored in the context of HRM and innovation.
We aim to address this gap by investigating the moderating ef-
fects of organizational conservatism on the relationship between
selected HRM practices and BI outcomes.
In this study, we investigate how selected HRM practices cor-
responding to each dimension of the MOA framework affect BI
 This article has been accepted for inclusion in a future issue of this journal. Content is final as presented, with the exception of pagination.
2 IEEE TRANSACTIONS ON ENGINEERING MANAGEMENT
outcomes (market-based BI outcomes), and how the efficacy
of those HRM practices is contingent upon the degree of orga-
nizational conservatism. We test our hypotheses using survey
data collected from chief technology officers (CTOs), research
and development (R&D) managers, and directors of research
labs who oversee the innovation activities of 79 large, mature
U.S.-based firms.
II. LITERATURE REVIEW AND HYPOTHESES
A. Human Resource Management and
Breakthrough Innovation
Drawing from the literature, we define BI as a product,
process, or service with either new-to-the world performance
features or familiar features that offer order-of-magnitude im-
provements in performance or cost that transform existing mar-
kets or create new ones [10]. The high degree of uncertainty and
risk embedded in BI often requires sophisticated HRM prac-
tices. Human resources differ from other types of organizational
assets, such as physical facilities, reputational capital, and tech-
nological assets in that they are inherently unique, do not de-
plete, and exhibit free will. While these characteristics make
them extremely valuable and a unique source of strategic lever-
age, they also make the task of managing human capital difficult
[11]. In particular, firms pursuing step-change or BI face a daunt-
ing HRM challenge. Although innovators create new lines of
business that provide growth options for firms, ironically their
own career paths are often plagued with risk and uncertainty
[12], [13] and those who support, coach, and manage them face
career-stalling obstacles as well [8]. Indeed, the likelihood that
organizational renewal through BI depends on whether such en-
trepreneurial personnel can overcome organizational opposition
to innovations whose development may require exploration of
the unknown [14] as well as disruptions in the market and the
firm [1].
B. Strategic Human Resource Management (SHRM) Practices
Through the MOA Lens
The MOA framework proposes that organizations can lead
people to focus on achieving a specific organizational goal
through motivating, providing opportunity, and assisting them
to develop the relevant abilities [3]–[6], [15].
Rewards and penalties are fundamental mechanisms firms
use to guide norms of behavior and create an understanding of
the firm’s priorities and values [16]. Hence, in this study, we
consider career risk and extrinsic rewards to be two factors that
motivate people in the organization to engage in BI projects. By
career risk, we mean the degree to which employees involved
in BI projects experience setbacks or stalled career trajectories
while working in the focal organization [17]. The promise of a
meaningful career path—i.e., promotion upward or lateral and
developmental moves to attain a general management position
and expertise—is one of the core elements HRM systems use to
motivate employees [18]. Extrinsic rewards are typically visible
or known to others, such as monetary compensation and social
recognition [19].
The opportunity dimension refers to “environmental or con-
textual mechanisms that enable action” [4]. In the BI context,
building on the concepts developed by Appelbaum et al. [3] and
Haesli and Boxall [6], we consider opportunity for BI to be the
ease with which employees can participate in idea development,
sharing, and expression. In this study, we define idea generation
facilitation as the extent to which an organization offers its em-
ployees the chance to generate and share ideas for innovative
projects [3], [6].
Ability refers to relevant skills and competences required
to implement necessary activities [5]. BI entails comparatively
higher levels of uncertainty and ambiguity [14] than in typical
new product development or ongoing operations. In a BI en-
vironment, the causal links between actions and outcomes are
difficult to understand or even detect [14]. Due to these charac-
teristics, unique skill sets are required [12]. Individuals working
in a BI context must be able to deal with complex information,
articulate assumptions and call them into question, rely on intu-
ition, and reconceptualize problems as learning occurs [20]. To
capture this dimension of the MOA framework, we introduce
two SHRM practices. The first, innovation talent development is
defined as the extent to which individuals with entrepreneurial
capabilities are recruited and mentored. The second, managerial
ambidexterity development is defined as the extent to which the
firm proactively develops its rising leaders’ abilities to invoke
and combine exploratory and exploitative practices as necessary
to maximize the firm’s long-term performance.
In sum, multiple SHRM practices may be employed in a
BI context to motivate employees (reward and risk), to enable
them to perceive opportunities (idea generation facilitation),
and to boost their ability (innovation talent development and
ambidexterity talent development) to create BI outcomes.
C. Organizational Conservatism as a Moderator
The extent to which BI-relevant practices work, however, may
depend on the general tendency of an organization toward risk
aversion [8]. A predominantly conservative culture aligns with
the organization’s exploitation capabilities [21] in that it pro-
motes reliable and predictable action. In such contexts, employ-
ees who are motivated to create pathways for growth through
BI are challenged by the mainstream management system that
focuses mainly on current customers, process efficiencies, and
near-term competitive threats. As a consequence, a tension may
exist between practices aimed at promoting behaviors that lead
to successful BI outcomes and the degree of conservatism that
prevails in an organization. Thus, the effectiveness of manage-
ment practices aimed at promoting innovation-oriented behav-
iors are likely to be modulated by organizational conservatism.
Therefore, we examine if and how organizational conservatism
impacts the relationships between HRM practices aimed at fa-
cilitating BI and the firm’s BI performance.
D. Research Model and Hypotheses
Our research model is depicted in Fig. 1. We investigate five
specific human resource related factors that have an effect on
 This article has been accepted for inclusion in a future issue of this journal. Content is final as presented, with the exception of pagination.
CHOI et al.: ORGANIZATIONAL CONSERVATISM, STRATEGIC HUMAN RESOURCE MANAGEMENT, AND BREAKTHROUGH INNOVATION
Fig 1. Conceptual model and hypotheses.
BI outcomes and how these effects vary based on organizational
conservatism.
1) Motivation Factors:
a) Career risk: Career risk may arise for multiple rea-
sons. First, BI projects are subject to higher probabilities of
failure than mainstream projects are, and project leaders may
therefore accumulate performance records that, by conventional
standards, do not appear positive in the short term [22]. Second,
BI projects that do succeed may take many years to come to
commercial fruition, outpacing an individual’s career horizon
and typical promotion schedule [12]. Finally, risk may accrue
to those in the BI system because they are working on projects
viewed to be “on the fringe” of the company’s strategic direction
[13].
A substantial body of work shows that the motivation to take
a risk is endogenous, originating from one’s proclivity for in-
novation, a passion for a specific project, or concern for the
organization’s future health. Although it may be true that in-
novators are more willing to take risks than others are, they
are not necessarily insensitive to career risk [1], [23], [24]. Ca-
reer risk as manifested through demotions or stalled pace of
promotion, or observations that such punishment was inflicted
on other innovators, may diminish the motivation of those en-
gaged in BI projects. As members of the innovation subunit
watch their colleagues with similar organizational tenure, but
who opted for mainstream system roles, move up the corporate
ladder, they may feel that their role is not valued and become
discouraged. The change in employees’ status within an orga-
nization or profession caused by taking a risk has a significant
impact on people’s work lives [25].
Hence, reducing the restrictions on entrepreneurial behavior
or the negative impacts from project failure can increase the ef-
ficiency of corporate entrepreneurship [26]. An organizational
climate that provides psychological safety tends to be associated
3
with increased creative potential among employees [27], [24].
Risk-tolerant cultures tend to celebrate failure and the employ-
ees who undertake those projects. So, while the rate of success
for BI projects may not be high due to their inherently high
levels of risk, more attempts are likely made, since those who
do become involved will receive cues that their activities are
considered legitimate.
In addition, the negative impact of career risk on stimulating
innovation can be magnified when firms express signals that im-
ply high organizational conservatism to their employees. Specif-
ically, when organizational conservatism prevails, we posit that
higher levels of career risk can have an even greater negative
impact on BI outcomes due to the lack of psychological sup-
port. In a conservative culture, sources of encouragement, even
informal, are less available to employees than in cultures more
tolerant of risk. The psychological support helps employees
persevere by providing a link between their actions and orga-
nizational meaning [28]. A lack of those support signals that
the innovator is on his own and his actions are not valued by
the firm. Therefore, an employee’s willingness to undertake or
persist on a BI project in a conservative culture is low, leading
to lower BI outcomes. In sum, the negative influence of ca-
reer risk on pursuing innovation can be magnified when firms
have a high level of conservatism. Thus, we hypothesize the
following.
Hypothesis 1: The negative impact of career risk on BI out-
comes will be higher when organizational conservatism is high
than when it is low.
b) Extrinsic rewards: Rewards are considered one of the
key factors for motivating innovative behavior [29]. Although
it may not be easy to classify all types of rewards, one well-
established taxonomy is the distinction between intrinsic and
extrinsic rewards [30], [31]. Intrinsic rewards are defined as
value derived from engaging in activities that are inherently
 This article has been accepted for inclusion in a future issue of this journal. Content is final as presented, with the exception of pagination.
4 IEEE TRANSACTIONS ON ENGINEERING MANAGEMENT
interesting or enjoyable, and are privately experienced. In con-
trast, extrinsic rewards are tangible, observable forms of reward,
external to the work itself, given to employees by managers. In
other words, other people control their size and whether or not
they are granted. Examples include pay raises, promotions, and
other forms of public recognition.
Conventionally, innovation is recognized as more likely
driven by intrinsic than extrinsic motivation [32]. Innovation
personnel may consider autonomy and the availability of re-
sources to move their projects forward to be a superior form
of compensation [33]. A proper level of challenge stimulates
creative professionals and can have a positive influence on their
motivation, because it can reflect the importance of the project
and signal trust in the innovator’s ability [34]. Interestingly—
although not surprisingly—some employees express even neg-
ative feelings toward extrinsic rewards because they view finan-
cial incentives as tools to regulate their activities [31]. Given
the assumption that reward systems for those engaged in BI
may be unstable due to the uncertainty associated with the out-
come of any particular innovation project [14], the importance
of intrinsic rewards is heightened.
However, another stream of literature argues that extrinsic
rewards may also increase the motivation for innovation. This
stream of literature insists that extrinsic rewards do at least
partially account for the motivation to engage in innovation be-
cause they may be indirect influencers on intrinsic rewards. For
instance, although financial rewards are typically categorized as
extrinsic, they may indirectly enhance an innovator’s feelings
of self-esteem or sense of achievement [30]. Previous studies
(e.g., Rosenfield et al. [35]) suggest that, to the degree that ex-
trinsic rewards are perceived by the employee as reflecting his
ability or competence, they may stimulate intrinsic motivation.
Manso [36] argues that the systematic application of extrinsic re-
wards such as promotion and monetary rewards helps managers
pursue longer term (i.e., potentially breakthrough) innovations.
Compensation-contingent performance theory asserts that in the
absence of solid criteria to estimate the value of a person’s ef-
fort and knowledge (for example, when a BI project requires
a lengthy time before commercial outcomes can be measured),
financial rewards continue to induce high levels of effort over
time [37].
Hence, in our study, we focus on the role of extrinsic rewards.
We argue that in a firm dominated by conservatism, publicly
recognizable rewards may increase the confidence of employees
and their sense of importance to the company. In this situation,
the promise of extrinsic rewards may serve as a clear signal
to innovators that engaging in such activities will be officially
valued. Therefore, we posit that acknowledgment via extrinsic
rewards is likely to have a positive impact on BI outcomes.
When the organization’s culture is conservative, the impor-
tance of such a signal is likely even greater. Extrinsic rewards
are one important mechanism that aligns behavior with organi-
zational objectives. When the organization’s management sys-
tem is driven by risk aversion, the use of extrinsic rewards is a
powerful design feature to encourage counter-cultural behavior
[38]. The signal of an official promise of an extrinsic outcome
may clarify to innovators that outcomes will be valued. There-
fore, we propose the following.
Hypothesis 2: The positive impact of extrinsic rewards on
BI outcomes will be higher when organizational conservatism
is high than when it is low.
2) Opportunity Factors:
a) Idea generation facilitation: We define idea genera-
tion facilitation as the extent to which an organization creates
the opportunity for employees to generate and share ideas for
innovative projects [3], [6]. Many companies devote a great
amount of effort and resources to cultivate and develop innova-
tion ideas [39] because the overall outcome of innovation on a
firm’s performance largely depends on the quality of the pool of
ideas. Hence, we posit that a firm investing in and managing an
idea development system to encourage employees to suggest,
discuss, share, and develop innovation ideas is more likely to
achieve successful BI outcomes than a firm that does not make
such an investment. Not investing would leave the occurrence
of BI to chance.
However, we predict that this positive effect will be dimin-
ished in conservative environments. In risk averse organizations,
new ideas may be subjected to suspicion, criticism, and various
types of tangible (e.g., resource constraints) and intangible (e.g.,
closed minds, internal politics) obstacles that demotivate em-
ployees to engage in developing and pursuing new ideas [40],
irrespective of the innovation subsystem’s investment in ways to
facilitate those activities. As employees in a conservative culture
find that ideas are never used they may question whether the time
spent generating them is productive, and will eventually with-
draw from participating in idea generation. We therefore offer
the following hypothesis.
Hypothesis 3: The positive impact of idea generation fa-
cilitation on BI outcomes will be lower when organizational
conservatism is high than when it is low.
3) Ability Factors:
a) Innovation talent development: We define innovation
talent development as the extent to which individuals with BI ca-
pabilities are actively recruited and trained. In established firms,
people engaged in BI projects may become discouraged due to
the inherent bureaucracy that is present [17], [41], and seek other
venues for their innovative ideas [42], [43]. Hence, personnel
selection that identifies and screens for new business creation
aptitude [23], along with development and retention efforts that
focus on apprenticing and mentoring those who are gaining
entrepreneurial experience [23], may help increase the BI ex-
pertise levels resident in the company. In this context, innova-
tion talent development represents the investment a firm makes
to develop the skills and abilities necessary to successfully
commercialize BI.
Although much entrepreneurial knowledge may be intrinsic,
social learning theory and organizational learning theory empha-
size that both organizations [44] and individuals [60] can learn
vicariously, i.e., through the observation of others [45], [46]. In
the case of innovation, vicarious learning can help individuals
develop entrepreneurial capability through observing, for ex-
ample, entrepreneurial decision-making [47] and new product
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CHOI et al.: ORGANIZATIONAL CONSERVATISM, STRATEGIC HUMAN RESOURCE MANAGEMENT, AND BREAKTHROUGH INNOVATION
development activities [48]. In addition, expertise theory
demonstrates that training and practice have an enormous im-
pact on the performance [49], and knowledge and skills obtained
under even standardized conditions can increase productivity in
creative domains [50], [51]. Thus, the development of an en-
trepreneurial capability is teachable to some degree. Hence,
the literature shows that investing in the development of en-
trepreneurial talent through selective hiring, training, and shar-
ing experiences can have net beneficial effects on the innovation
activities of the firm. We would also expect this effect to be ac-
centuated in risk-tolerant environments because of the general
acceptance and appreciation of entrepreneurial behaviors in the
firm.
However, in a conservative environment, the constraints on
entrepreneurial action may be too frustrating, and will dimin-
ish the value of investments in innovation talent development.
Scholars find that if individual knowledge and experiences are
not properly networked, efficiently shared, and actively uti-
lized, they provide limited benefit to the organization in terms
of innovation-related capabilities [32]. If BI takes place only
via ad hoc, individualistic wins, it may be difficult to system-
atize investments in innovation talent development. We therefore
expect the following relationships.
Hypothesis 4: The positive impact of innovation talent de-
velopment on BI outcomes will be lower when organizational
conservatism is high than when it is low.
b) Managerial ambidexterity development: Ambidexter-
ity theory refers to the degree to which innovation and ongoing
operations are managed simultaneously within a firm [52] and
recognizes that the same management processes cannot work
for all types of innovation [53]–[55]. Since firm-level ambidex-
terity entails systematic approaches to organizational design and
processes [33], scholars emphasize the importance of mid- and
senior-level management expertise in making resource alloca-
tions and commitments that balance exploration and exploitation
efforts, or innovation and operationally oriented investments
[35], [53]. In addition to organizational-level ambidexterity that
can be managed through separated but connected subsystems
(e.g., structural ambidexterity), researchers also emphasize the
importance of nurturing employees’ individual ambidexterity so
that their decisions and actions are made in the proper context.
The literature references this as contextual ambidexterity [33],
[35], [36], [56].
Mom et al. [54] insist that the degree of organizational am-
bidexterity might be deeply rooted in individual employees’
capability to balance exploitation with exploration. Companies
whose managers do not understand ambidexterity will likely
allow the exploitation environment’s priorities to outweigh the
needs of the exploration environment [21]. Organizations that
develop their rising leaders’ awareness and understanding of
how to manage exploration and exploitation equally well are in-
vesting in organizational ambidexterity through these commit-
ments to their leaders’ development. Hence, in this study, we
adopt the view that developing ambidexterity expertise among
rising leaders may be one of the critical SHRM practices firms
can implement in order to boost the likelihood of successful BI
5
outcomes. Drawing from Mom et al. [54], we define manage-
rial ambidexterity as a manager’s ability to invoke and combine
exploratory and exploitative practices in a balanced manner as
necessary.
Under low organizational conservatism, there is a general ap-
preciation of the challenges and rewards of making big bets that
may not necessarily pay off. In such contexts, ambidextrous
managers would be encouraged to consider long time frames,
seek out uncertain opportunities as well as pursue more certain
shorter term goals. On the other hand, in highly conservative or-
ganizations, even if managers are aware of potential long-term
opportunities, they may be constrained from exercising their
skills in balancing exploration (with its inherent risks) with ex-
ploitation (which may not appear so imminently risky) because
of the likely skepticism they might encounter. Therefore, we
hypothesize the following.
Hypothesis 5: The positive impact of managerial ambidex-
terity development on BI outcomes will be lower when organi-
zational conservatism is high than when it is low.
III. METHODS
A. Sample and Data Collection
Our study is based on a survey implemented in conjunction
with members of the Industrial Research Institute (IRI), a pro-
fessional organization of R&D managers, directors, and CTOs
of Fortune 1000 U.S.-based industrial companies. Respondents
were R&D managers, CTOs, and directors of research labs who
oversee the innovation management system of their respective
organizations.
Following Dillman’s approach [57] to data collection, we sent
mail surveys to 850 potential respondents chosen from partic-
ipants in the annual IRI conferences. Two follow-up mailings
were sent over the next few months. Two percent (17) of the
mailings were returned due to incorrect addresses, and 35 po-
tential respondents refused to complete the survey, for various
reasons including “not interested in the topic” (15), “time con-
straint” (15), and “security policy of company” (5). Based on
this feedback, we reduced the potential respondent pool to 714.
A total of 79 surveys was received after several reminders, yield-
ing a response rate of 12%.
U.S.-based large industrial firms comprised the population of
interest for our survey, since these firms are known to struggle
with the problem of BI due to their firmly established practices
and necessary focus on operational excellence. We constructed
our mailing list from the list of large industrial firms that are
members of IRI. Firms in service industries and utilities were
excluded from the study since patterns of innovation in these
industries are significantly different from those in industrial
companies. We checked for response bias by comparing the
profile of the firms in our sample with the profile of firms who
are IRI members, on firm revenue, size in terms of employees
and R&D intensity. A chi square test revealed that no systematic
differences between our sample and the larger population of
firms of interest in our study. Since our survey was conducted
over a six-month period, we also checked if any systematic
 This article has been accepted for inclusion in a future issue of this journal. Content is final as presented, with the exception of pagination.
6 IEEE TRANSACTIONS ON ENGINEERING MANAGEMENT
differences exist between firms that responded early versus those
that responded late. We split our sample into two subsets—early
and late respondents based on when the survey was returned
and compared the firms in the two subsets on firm revenue, size,
and R&D intensity. A chi square test revealed no systematic
differences between early and later respondents in our sample.
Average revenue and number of employees for the sam-
ple companies are US $8.4 billion and 23,625, respec-
tively. Nine industries comprised 70% of the sample; these
were aerospace (7%), automotive (6%), chemicals (14%),
consumer goods (6%), electronics (7%), materials sciences
(8%), paper and packaging (7%), pharmaceuticals (6%), and
telecommunications (6%).
B. Scale Development and Validation and Variable
Description
We followed procedures recommended by Fowler [58] in de-
veloping and validating the scales used in this study. The scales
were developed based on prior literature and on extensive input
from practitioners. The practitioner interactions were conducted
through structured discussions with a subcommittee of the IRI,
established to study management practices associated with BI in
large established companies. First, we presented the conceptual
model to the subcommittee members for review and refinement.
Scale items were drafted for each construct over the next sev-
eral months, by delineating the domain of the construct and
sampling items that reflect the domain. We examined the litera-
ture along the way to incorporate the state of the art of scholarly
understanding of each construct as it took shape.
A long version of the survey was presented to the subcom-
mittee for comment and review to assess face validity, and to
pretest the scale items for reliability. Scales were refined on the
basis of that input and also based on subsequent data collection
from a small test sample of IRI members not associated with
the research subcommittee.
1) Variable Definitions and Measures: Scale items, factor
loadings, and reliability values are shown in Table I. The de-
pendent variable, BI outcomes, refers to the degree to which
the firm entered new markets and technology domains and in-
troduced products to the market based on BI over the most
recent five-year history. This variable captures meaningful BI
outcomes, given that so many benefits accrue to BI beyond
short-term financial gain.
The five main effect variables, career risk, extrinsic rewards,
innovation talent development, managerial ambidexterity devel-
opment, and idea generation facilitation, were measured using
multi-item scales, developed on the basis of the extant literature
referenced in the Appendix and the input of the IRI members
with whom we worked.
Regarding career risk, we refer to the job insecurity scale
(JIS) constructed by Ashford et al. [59]. We adapted key ideas
embedded in the JIS for the purposes of this study. For extrin-
sic rewards, we refer to the work of Mottaz [19], who suggests
two types of extrinsic rewards, extrinsic social rewards such as
acknowledgment within an organization, and extrinsic mone-
tary rewards such as tangible compensation. Based on previ-
ous literature (see [3], [6], and [60]), we developed measures
for idea generation facilitation to estimate the degree to which
organizations institute procedures to facilitate the generation,
sharing, and nurturing of ideas for BI. To construct the scale
for innovation talent development, we draw upon Kanter [42]
and Dougherty and Hardy [28], and tap the degree to which
organizations invest in identifying, recruiting, and educating in-
dividuals for BI. The measures for managerial ambidexterity de-
velopment are derived from O’Reilly and Tushman’s work [53]
describing the characteristics of ambidextrous organizational
leaders.
The moderating variable, organizational conservatism, is a
single item measure that directly captures the organization’s
degree of risk aversion.
2) Control Variables: A number of other factors have the
potential to impact a firm’s BI outcomes, but are not variables
of interest in this study. We control for R&D intensity, BI in-
tensity, and firm size. R&D intensity is measured as the ratio of
R&D expenditures to sales. BI intensity is computed as the per-
centage of the firm’s R&D budget exclusively allocated for BI.
To measure firm size, we used the logarithm of the mean revenue
over the three-year period prior to the outcome observation.
IV. ANALYSIS AND RESULTS
Table II provides the number of responses, descriptive statis-
tics, and intercorrelations for the study variables. To mitigate
concerns about multicollinearity, we mean-centered the vari-
ables [61]. Variance inflation factors of all values are lower
than 10, indicating multicollinearity should not be a concern in
our sample. As our items for independent and dependent vari-
ables were collected from the same respondent, we checked if
common method bias is likely to manifest in our data. Following
recommended practice in the literature, we ran Harman’s single-
factor test [62]. The test generated six factors (all eigenvalues
> 1) from all items, and the 32% variance explained by factor
1 indicates that the common method variance is not a major
concern in our study.
Organizational conservatism is negatively correlated with
SHRM practices proposed to enable BI, e.g., extrinsic rewards
(ρ = −0.30), innovation talent development (ρ = −0.45), and
managerial ambidexterity development (ρ = −0.35), and is
positively correlated with the constraining factor, career risk.
(ρ = 0.29). Idea generation facilitation shows a positive corre-
lation with organizational conservatism (ρ = 0.13), but it is not
significant (at the 0.05 level).
To validate the constructs, we followed standard procedures.
We pooled the items for each block of constructs in our model
and ran a factor analysis. The rotated factor loadings indi-
cate that all items loaded highly on their respective constructs
(> 0.70). The Cronbach’s alpha for all the constructs are above
the minimum recommended value of 0.6, except for two con-
struct (Extrinsic Rewards, alpha = 0.55 and Idea Generation
Facilitation, alpha = 0.56). To assure discriminant validity, we
compare the average variance extracted (AVE) and squared
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CHOI et al.: ORGANIZATIONAL CONSERVATISM, STRATEGIC HUMAN RESOURCE MANAGEMENT, AND BREAKTHROUGH INNOVATION 7

TABLE I
FACTORS LOADINGS AND CRONBACH’S ALPHA

TABLE II
DESCRIPTIVE STATISTICS AND CORRELATIONS COEFFICIENTS

Bold fonts indicate significant item loadings on respective factors.

interconstruct correlation for dimension that has multiple and full model. The full model is expressed in the following
constructs (motivation and ability). The results show that the general form. The results are summarized in Table III.
discriminant validity is established in both dimensions, as AVE
is greater than squared interconstruct correlation in both di- BI outcomes (market-based)
mensions (Motivation dimension: 0.72 > 0.03 and Ability = α0 + α1 Organizational conservatism
dimension: 0.61 > 0.19). + α2 SHRM practices
To examine the effect of the MOA framework-based SHRM
practices on BI outcomes, following the model adopted in previ- + α3 Organizational conservatism × SHRM practices
ous studies [6], [48], we employ a linear additive model that as- + α4 Firm size + α5 R & D intensity
sumes that BI outcomes are a function of the form BI outcomes + α6 BI intensity + e. (1)
= ƒ(M + O + A). Hierarchical ordinary least squares (OLS)
regression (with robust standard errors) is employed to test the H1 postulates that the negative impact of career risk on BI
hypotheses. The analysis consists of seven models, Model 1–6 outcomes will be higher when organizational conservatism is
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8 IEEE TRANSACTIONS ON ENGINEERING MANAGEMENT
TABLE III
RESULTS OF HIERARCHICAL REGRESSION ANALYSIS
high than when it is low, indicating a negative interaction be-
tween career risk and degree of organizational conservatism on
BI outcomes. While Model 1 (β = −0.249, p < 0.05) indi-
cates that career risk has a direct negative impact on BI out-
comes, interestingly and surprisingly, the interaction term has a
positive and significant effect on BI outcomes, as shown in
Model 2 (β = 0.120, p < 0.05) and the Full model (β =
0.089, p < 0.1). These results suggest that in conservative or-
ganizations, the negative effect of career risk on BI outcomes
is mitigated. To aid in understanding these results, we plotted
the interaction effects in Fig. 2(a). Fig. 2(a) shows that when
high organizational conservatism exists, career risk is not much
of a factor in determining BI outcomes. The slope of the high
organizational conservatism line does not change significantly
over the high versus low career risk scenarios. Although H1 is
not supported, the results are interesting and provide meaningful
implications, which we elaborate in Section V.
H2 predicts that the positive impact of extrinsic rewards on
BI outcomes will be higher when organizational conservatism is
high than when it is low, implying a positive interaction between
extrinsic rewards and degree of organizational conservatism on
BI outcomes. While Model 1 (β = 0.363, p < 0.05) indicates
that extrinsic rewards have a positive impact on BI outcomes,
as shown in Model 2 (β = 0.141, p < 0.1) and the Full model
(β = 0.234, p < 0.05), organizational conservatism positively
moderates this effect, supporting H2. Fig. 2(b) provides a plot
to understand these results. The plot indicates that the impact
of extrinsic rewards on BI outcomes is contingent on the firm’s
level of conservatism.
H3 proposes that the positive impact of idea generation fa-
cilitation on BI outcomes will be lower when organizational
conservatism is high than when it is low. Although a direct
effect of idea generation facilitation on BI outcomes is not ob-
served, as predicted in H3, the interaction term between idea
generation facilitation and the degree of organizational conser-
vatism has a negative and significant effect on BI outcomes,
shown in both Model 4 (β = −0.189, p < 0.05) and the Full
model (β = −0.168, p < 0.05). Thus, our results indicate that
while idea generation facilitation is critical to innovation, it is
likely to lead to innovation outcomes only in the presence of
organizational support. As Fig. 2(c) shows, the relationship be-
tween idea generation facilitation and BI outcomes is negatively
moderated by organizational conservatism.
H4 postulates that the positive impact of innovation talent
development on BI outcomes will be lower when organizational
conservatism is high than when it is low, indicating a negative
interaction between innovation talent development and degree
of organizational conservatism on BI outcomes. While a pos-
itive impact of innovation talent development on BI outcomes
is seen in Model 5 (β = 0.452, p < 0.001), as expected in
H4, this effect is negatively moderated by organizational con-
servatism (β = −0.163, p < 0.05), shown in the Full model.
Overall, these results indicate that investments in recruiting and
developing innovative talent pay off in terms of BI outcomes.
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CHOI et al.: ORGANIZATIONAL CONSERVATISM, STRATEGIC HUMAN RESOURCE MANAGEMENT, AND BREAKTHROUGH INNOVATION
Fig 2. Moderating effects of organizational conservatism on the influence of SHRM practices on BI outcomes.
Also in alignment with our expectations, in highly conserva-
tive firms, investment in innovation talent development has an
adverse effect on commercializing innovation. It may be that
such investment unleashes innovation efforts by individuals and
groups that may eventually not be supported by the organiza-
tion, creating frustration and inferior BI outcomes. Thus, our
results indicate that while entrepreneurial talent is important, it
is likely to lead to innovation outcomes only in the presence of
organizational support.
Fig. 2(d) shows that the positive association of innovation
talent development with BI outcomes occurs where organiza-
tional conservatism is low, but it is negatively associated with
BI outcomes where organizational conservatism is high. In gen-
eral, BI outcomes are always greater with low organizational
conservatism, and innovation talent development increases BI
outcomes under low organizational conservatism.
H5 proposes that the positive impact of managerial ambidex-
terity development on BI outcomes will be lower when organi-
zational conservatism is high than when it is low. Therefore, we
expected a negative interaction between managerial ambidexter-
ity development and the degree of organizational conservatism.
Whereas managerial ambidexterity development shows a strong
positive impact on BI outcomes (β = 0.444, p < 0.001) in
Model 5, interestingly, there is no significant interaction effect,
indicating that ambidexterity impacts BI outcomes irrespective
of the firm’s orientation toward conservatism.
9
V. DISCUSSION AND CONCLUSION
Past research has focused intensively on how to cultivate an
innovative work environment or encourage people to engage
in incremental innovation processes through employing HRM
practices but only limited attention has been paid to investigating
beyond the traditional new product development activity. Our
analysis provides a number of insights into the use of SHRM
practices for BI, some of which are counterintuitive.
First, we find that while career risk has a direct negative im-
pact on BI outcomes, these negative impacts are alleviated by
organizational conservatism. This may be because in conser-
vative cultures, BI projects are not initiated or developed by
individual employees, but rather come only from senior-level
strategic decisions prompted by external threats or other market
forces. Therefore, for individuals, the chance to link their career
path to BI outcomes may be limited. An alternative and plau-
sible explanation is that in highly conservative organizational
cultures, even low career risk may be overcautiously perceived
as high.1
However, where there is low organizational conservatism,
low levels of career risk are more positively associated with BI
outcomes than are high levels of career risk. In such a work
environment there is perhaps more BI initiative taken at the
1 We thank an anonymous reviewer for suggesting this alternative explanation.
 This article has been accepted for inclusion in a future issue of this journal. Content is final as presented, with the exception of pagination.
10
individual or grassroots level. Thus, it appears that in organiza-
tions more tolerant of risk, simply removing the threat of career
punishment unleashes human capital talent to focus on the BI
mandate, with positive outcomes.
Second, we find that the positive impact of extrinsic rewards
on BI outcomes will be intensified under the presence of high
organizational conservatism. In an environment of high organi-
zational conservatism, the general behavior of employees would
be to follow safe and proven paths to outcomes. Yet, BI requires
some risks, and our results suggest that when individuals are re-
warded for innovation they can act in a manner that leads to BI
outcomes. In effect, extrinsic rewards can act to counterbalance
the normal tendency of the employees in the firm to refrain from
sticking their necks out.
However, where there is low organizational conservatism, an
emphasis on extrinsic rewards (e.g., monetary compensation)
results in lower BI outcomes. When the culture encourages en-
trepreneurship, too much attention to extra-normal rewards may
attract people to work in BI who may not have the appropriate
skills and are only drawn by the promise of extrinsic rewards.
Given that risk is tolerated in such a culture, an extrinsic reward
system would not necessarily differentially reward BI outcomes.
Rather, successful innovation would be generated by drawing
from those who are intrinsically motivated to participate and
skilled in the practice of BI.2
A third finding, regarding both idea generation facilitation
and innovation talent development, shows that successful BI
outcomes are maximized when management invests in these
practices in an environment of low organizational conservatism,
while the impact of such investments on BI outcomes is rela-
tively restricted where there is high organizational conservatism.
In other words, it is not worth developing people to engage in BI
if the organizational tendency punishes them for doing so. Nei-
ther is it worth investing in an idea development infrastructure
if the organization stalls those ideas’ progress, either through
apathy or antipathy.
Fourth, we find that developing a capability for ambidexter-
ity among an organization’s managers positively influences BI
outcomes, irrespective of the degree of organizational conser-
vatism. This finding supports previous studies that demonstrate
the important role of managerial talent in impacting BI out-
comes, and therefore, the importance of cultivating the under-
standing of both exploration and exploitation capabilities among
a firm’s managers.
The MOA framework provides an approach to designing
SHRM practices that will aid BI success under different cul-
tures of risk tolerance. Our results indicate that the Motivation
aspect of the framework is complex when considering how to
2 An alternative explanation is that management offers differential financial
incentives for less attractive or riskier projects that face a higher rate of failure
due to their risky nature. We are aware of firms that have offered phantom
stock, for example, to New Ventures teams who have taken on projects that are
poorly aligned with the organization’s current strategy and are expected to be
spun out. While this occurred with some degree of frequency in the late 1990s,
most companies no longer offer differential rewards for varying risk profiles
of projects, due to the difficulty of administering the reward system and the
perception of favoritism to those who benefit. Our thanks to an anonymous
reviewer for suggesting this alternative explanation.
IEEE TRANSACTIONS ON ENGINEERING MANAGEMENT
deploy SHRM practices in environments of varying degrees of
conservatism. Under highly conservative environments, the re-
sults reported here demonstrate that any motivation toward BI
comes from strong signals from leadership. Our data show that
the negative impact of career risk on BI is reduced in conserva-
tive environments, implying that BI projects that succeed have
organizational and leadership support necessary to allow them
to move toward commercial success. Higher extrinsic rewards,
another signal that BI is legitimized, are also more strongly as-
sociated with BI outcomes under highly conservative environ-
ments than under those with a less conservative culture. Under
conservative cultures, it is likely that clear, specific strategic
initiatives are articulated and supported by senior leaders but
that BI activities in general may not be. When the culture is
more risk tolerant, however, the opposite story emerges. Lower
levels of career risk in the risk-tolerant culture are associated
with greater BI outcomes, but the use of extrinsic rewards in
a risk-tolerant environment is associated with fewer successes.
Risk-tolerant cultures may encourage BI activity, but leaders
must guard against attracting employees to BI who may not be
capable, but are motivated to participate due to the promise of
extra financial rewards. In summary, these results point to the
notion that motivation to engage in BI in conservative cultures is
based on clear strategic initiatives driven by organizational lead-
ers who use SHRM practices to counter the predominant culture,
whereas in risk-tolerant cultures, it is signaled by SHRM prac-
tices that allow for autonomous BI activity that comes through
intrinsically motivated individuals.
Implications for SRHM practices associated with the Op-
portunity aspect of the MOA framework, based on the results
presented here, are straightforward. Organizations that embed
mechanisms for facilitating opportunity for BI to occur will ex-
perience success, so long as the organizational culture does not
snuff out the BI ideas that result. If an organization’s culture is
risk averse, then any provision of opportunities to engage in BI,
such as facilitating the generation of ideas for breakthroughs,
will result in frustration and perhaps a sense that the organiza-
tion is sending mixed messages. In short, organizations that are
not willing to encourage BI should not build in the opportunities
for employees to initiate it.
Finally, our findings suggest that SHRM implications for the
Ability aspect of the MOA framework, when applied to BI,
are not straightforward. Specifically, developing ambidexterity
as a competence in rising leaders has a positive effect on BI
outcomes under any organizational culture. Leaders who under-
stand the management processes associated with BI can have a
strong influence on BI outcomes since they control resources,
understand the BI phenomenon, and can provide support in-
dependent of the culture if they are not yet in a position to
influence it. However, investing to develop entrepreneurial tal-
ent throughout the organizational ranks appears to be a waste
of resources in conservative organizational cultures. This find-
ing parallels the opportunity finding. Making investments in
processes that enable opportunity for BI or in talent that can de-
velop BI projects into commercial reality does not contribute to
BI outcomes in conservative cultures. The conservative culture
will snuff out the influence of those investments as the BI ini-
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CHOI et al.: ORGANIZATIONAL CONSERVATISM, STRATEGIC HUMAN RESOURCE MANAGEMENT, AND BREAKTHROUGH INNOVATION
TABLE IV
CONCEPTUAL DEFINITIONS AND THEORETICAL SUPPORT FOR CONSTRUCTS
tiatives tend to require long time horizons and multiple types of
resources.
These results offer interesting contributions to the innovation
literature regarding talent management under varying organiza-
tional cultures. Using the correct SHRM practices, conserva-
tive cultures can, in fact, succeed with BI. They appear most
likely to succeed when the BI initiatives are driven from the
organization’s leaders. Under those conditions, a BI project is
legitimized, and signals to employees that it is safe to engage
are sent through certain SHRM practices, namely reduced ca-
reer risk and provision of extrinsic rewards. Such a setting may
explain the overall lower performance on BI outcomes of con-
servative organizations, in that the frequency of undertaking
BI, and therefore the competency for executing it are low. How-
ever, when company leadership decides to undertake it, there are
strong investments in support and commitment for a particular
BI project.
Risk-tolerant cultures, on the other hand, appear to create the
room for the company to develop a capability for BI by attracting
those who are self-motivated, and by instituting practices that
encourage higher frequency of engagement with BI projects and
greater expertise development. The result is a greater degree of
BI success.
Using the MOA framework provides an approach to designing
SHRM practices that will aid BI success under different cultures
of risk tolerance. In this paper, we contribute to the expanding
use of the MOA framework by applying it to the innovation
context, where the predominant culture of most established or-
ganizations is unaligned with the needs of the innovation man-
11
agement system. The results of this study offer an example of
an MOA design that varies in a single organization based on the
organizational subsystem’s objectives and relationship to the
mainstream organizational management system. Applying the
MOA framework to other organizational subsystems may be a
fruitful area of further investigation.
Our findings contribute to the SHRM literature by demon-
strating the design of SHRM practices associated with varying
organizational subcultures. These results are consistent with
a contingency-based perspective in the SHRM literature [63]
that posits that the effect of SHRM practices targeting specific
organizational goals (e.g., BI) must be customized depending
on environmental contingencies, such as –in the case examined
here – a firm’s degree of conservatism.
Finally, our study contributes to the growing literature on BI.
While many studies focus on cultural, strategic, and structural
antecedents to BI success, the details of specific SHRM tools
that can mitigate the effect of organizational conservatism on BI
outcomes, and those that can work in concert with a risk-tolerant
culture, have not been explored.
While these results shed light on how HRM practices con-
tribute to BI, the study leaves abundant room for future research.
First, the explanatory variables used in this study to examine how
to best use SHRM practices to influence BI outcomes did not
all show direct effects. In one case, (idea generation facilitation)
only interaction effects were significant. This result suggests
that, in order for a BI to occur, a company needs to not only pro-
vide motivations but also set up opportunity and ensure devel-
opment of employee abilities. In other words, the model should
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12
include a three-way interaction of (M × O × A) along with two-
way interactions with organizational conservatism. Our sample
size was too limited to test for this complete picture, but it
would certainly illuminate the relationships between the SHRM
practices and BI outcomes more comprehensively.3
Second, more work is needed to develop confidence in the ro-
bustness and generalizability of our findings. Testing the same
model and measures with a larger sample size will strengthen
confidence in the reliability of the findings presented here. In
addition, several of the measures are weak. The Cronbach’s al-
pha for the extrinsic rewards and idea generation facilitation
constructs are below the threshold for adequate scale reliability.
Also, the single item scale for our moderator variable, organi-
zational conservatism, is a weakness of this study. One item
may not capture the range of the construct, and may not be a
reliable measure. Strengthening this measure by elaborating it
into a reliable multi-item scale will be an important direction
for future studies of this sort.
Third, future research might examine the roles of other orga-
nizational contextual differences (e.g., institution type, varying
organizational sizes, or industry-specific features) on the re-
lationship between HRM practices and BI outcomes. Finally,
examining additional SHRM practices that express the MOA
framework will strengthen the robustness of our understanding
of ways to design SHRM practices to influence BI outcomes
under varying contexts.
This study provides insight into the important question of
how human capital management practices impact BI outcomes
in large, established firms. The results reported here demon-
strate that the effects of HRM practices on an organization’s
market-based innovation performance depend on the organi-
zation’s characteristics, but those relationships are not neces-
sarily obvious. The findings are counterintuitive and highlight
the complexities involved in successfully managing BI and the
talent that shepherds them in large firms.
APPENDIX
See Table IV at the top of previous page.
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CHOI et al.: ORGANIZATIONAL CONSERVATISM, STRATEGIC HUMAN RESOURCE MANAGEMENT, AND BREAKTHROUGH INNOVATION
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Byungchul Choi received the Ph.D. degree in man-
agement from Rensselaer Polytechnic Institute, Troy,
NY, USA, in 2015.
He is currently an Assistant Professor in strate-
gic management with the Hankuk University of
Foreign Studies, Seoul, South Korea. He has au-
thored/coauthored several papers in refereed jour-
nals or forthcoming in journals, including the Orga-
nization Science. His research interests include de-
terminants of innovation strategy, institutionalizing
breakthrough innovation, and the Chinese innovation
system.
T. Ravichandran is the Associate Dean for Research
and the Irene and Robert Bozzone’55 Distinguished
Professor in management and technology with the
Lally School of Management, Rensselaer Polytech-
nic Institute, Troy, NY, USA. His research has been
published or is forthcoming in journals such as the
Communications of the ACM, Decision Sciences, the
European Journal of Information Systems, the IEEE
TRANSACTIONS ON ENGINEERING MANAGEMENT, In-
formation Systems Research, Information Technology
and Management, the Journal of Management Infor-
mation System, the Journal of Service Research, MIS Quarterly, and Organi-
zation Science. He works closely with large companies and startups on digital
strategy, innovation, and supply chain management.
Mr. Ravichandran is a frequent speaker in many industry and academic fo-
rums around the world. He was a recipient of several best paper awards for his
papers.
Gina Colarelli O’Connor is currently a Professor
in marketing and innovation management with the
Lally School of Management, Rensselaer Polytech-
nic Institute, Troy, NY, USA. Her teaching and re-
search focuses on how large established firms link
advanced technology development to market oppor-
tunities, create new markets, and build internal capa-
bilities to innovate in a sustained manner. She has au-
thored/coauthored numerous papers in refereed jour-
nals, including the Organization Science, the Journal
of Marketing, the IEEE TRANSACTIONS IN ENGINEER-
ING MANAGEMENT, and the Journal of Product Innovation Management, and
several books, many of which have won awards.