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Comparing Innovation Capability of

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Alper Erturk

Journal of Small Business Management

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Journal of Small Business Management 2010 48(3), pp. 325–359

Comparing Innovation Capability of Small

and Medium-Sized Enterprises: Examining
the Effects of Organizational Culture
and Empowerment jsbm_297 325..359

by Nigar Demircan Çakar and Alper Ertürk

This study analyzes the impact of organizational culture and empowerment on

innovation capability, and examines the peculiarities of these effects. The study’s
hypotheses are tested by applying both individual and firm-level analyses to survey
data collected from 743 employees from 93 small and medium-sized firms located in
Turkey. For medium-sized enterprises on both the individual and firm level of
analysis, results suggest that collectivism and uncertainty avoidance are positively
associated with empowerment, whereas power distance is negatively related to
empowerment. Assertiveness focus has no relations with empowerment and innova-
tion capability, yet among cultural dimensions, only uncertainty avoidance is related
to innovation capability. For small-sized enterprises, findings suggest that both power
distance and uncertainty avoidance are linked to both empowerment and innovation
capability on the individual level, whereas two new paths between collectivism and
innovation capability and between assertiveness focus and empowerment are found
on the firm level. Also, empowerment is found to be positively related to innovation
capability for both small and medium-sized enterprises (SMEs) on both the individual
and firm level. In terms of managerial practice, our study helps clarify the key role
played by cultural dimensions in the process of shaping an empowering and inno-
vative work environment. Findings also reveal that managers should focus on par-
ticipative managerial practices (e.g., empowerment) to promote innovation capability
of SMEs.

Nigar Demircan Çakar is currently a full-time associate professor of management at Düzce

University, Turkey.
Alper Ertürk is currently a visiting associate professor (research fellow) of management at
Düzce University, Turkey.
Address correspondence to: Nigar Demircan Çakar, Düzce University Continuing Education
Centre, Konuralp, 81120, Düzce, Turkey; Tel: +90 555 235 55 55, +90 380 542 11 37; Fax: +90
380 542 11 36; E-mail: nigarcakar@duzce.edu.tr.

ÇAKAR AND ERTÜRK 325


Introduction
Small and medium-sized enterprises
(SMEs) are increasingly looking for ways
to enhance their ability to innovate effec-
tively. The ability to develop and launch
innovative new products by using the
latest technology quickly before global
competitors, or soon thereafter, is a key
factor in gaining first-mover advantages,
achieving product success, capturing
market share, increasing return on
investment, and long-term viability
(Allocca and Kessler 2006). Successful
innovation in SMEs is associated with
good performance and related to sub-
sequent growth.
The existence of innovative and
internationally competitive SMEs is a
critical requirement for countries’ future
growth and prosperity (Özçelik and
Taymaz 2004). Some studies have tested
the relationship between innovative
performance and firm size (Cohen and
Klepper 1996; Acs and Audretsch 1991).
However, a relatively smaller body of
research focuses on such organizational
characteristics as organizational culture
and perceptions of empowerment that
lead to innovation. Therefore, this study
is undertaken to bridge the gap among
culture, perceptions of empowerment,
and innovation capability in that the
aim is to compare how innovation
capability is developed by specific cul-
tural dimensions and empowerment in
SMEs.
To examine the roles of organiza-
tional culture and empowerment in
enhancing innovation capability, em-
powerment is considered as an anteced-
ent of innovation capability and also as a
consequence of organizational culture.
The differentiations of the effects of
organizational culture and empower-
ment on innovation capability in smaller
and larger firms are then compared.
Accordingly, two basic research ques-
tions of this study are stated as the
following:
326 JOURNAL OF SMALL BUSINESS MANAGEMENT
(1) What are the effects of organiza-
tional culture and empowerment on
innovation capability?
(2) What are the differences between
small and medium sized manufac-
turing firms in terms of the relation-
ships among organizational culture,
empowerment and innovation
capability?
This study contributes to literature in
some respects. First, unlike most of
research, which regards innovativeness
as an independent variable (Danneels
and Kleinschmidt 2001), this study
specifies this concept as a dependent
variable. Such an approach elevates
current work as it responds to the need
of research examining factors that influ-
ence innovation capability. Second,
instead of investigating the effects of
organizational culture and empower-
ment on innovativeness separately, this
study focuses on a rather neglected
aspect of innovation capability by exam-
ining the combined effects of those. In
particular, this study hypothesizes that
organizational culture affects innovation
capability directly and through empow-
erment. This paper adds further knowl-
edge about the impact of culture on
innovative behavior within SMEs. As we
know, there is no research deeply
exploring both cultural and managerial
antecedents of innovation capability in
SMEs. Third, comparing effects of
culture and empowerment on innovation
capability in small and medium-sized
firms enables both researchers and prac-
titioners to highlight and better under-
stand how management strategies and
cultural values produce differential
effects on innovation capability of differ-
ent sized enterprises. Finally, the results
of this study are based on individual and
firm-level statistical analyses in order to
better examine the significant relation-
ships among constructs.
Our paper is structured as follows.
First, by providing a theoretical
background to the study, we establish
the theoretical relationships among
organizational culture, empowerment,
and innovation capability. Throughout
the first section, we also present the
hypotheses to be empirically tested. We
then introduce the research methods
and analytical procedure, and report
the results of the analyses and the find-
ings. Finally, we close by discussing
conclusions, highlighting some implica-
tions for practitioners, and presenting
limitations and suggestions for future
research.
Theoretical Background
Innovation Capability
Innovation has been defined in
several ways. However, it is generally
defined not only as the conceptualization
of a new product or service (or a greatly
improved product or service), but also as
the successful bringing of the new
product or service to the market. Accord-
ingly, the firm’s innovation capability is
its ability to mobilize the knowledge,
possessed by its employees (Kogut and
Zander 1992), and combine it to create
new knowledge, resulting in product
and/or process innovation. It is recog-
nized as well that competitive advantage
can be obtained with a high-quality
workforce that enables organizations
to compete on the basis of quality and
innovation.
Innovation capability is one of the
most important dynamics that enables
SMEs to achieve a high level of com-
petitiveness both in the national and
international market. Thus, how to
promote and sustain an improved inno-
vation capability should be the key
focus area of the top managers of SMEs.
So, unlike most research that examines
innovativeness as an independent vari-
able, the main purpose of this study is
to investigate the combined effects of
organizational culture and empower-
ment on innovation capability. Specifi-
cally, though this study contends that
ÇAKAR AND ERTÜRK
organizational culture and empower-
ment are significantly related to innova-
tion capability, organizational culture is
also expected to affect innovation
capability both directly and through
empowerment.
Organizational Culture
Organizational culture may be
described as the shared values and
assumptions that guide behavior in an
organization (Schein 1990). In both per-
sonal and organizational level, it is
believed that organizational culture pro-
vides a competitive advantage and has
a considerable effect in developing
employee–manager relationship (Doney,
Cannon, and Mullen 1998; Kotter and
Heskett 1992).
To operationalize organizational
culture, Hofstede’s (2001) cultural frame-
work is generally being used because it
has drawn the greatest attention from
management scholars in recent years,
and is well established and widely
applied in management and organization
research (e.g., Waarts and van Everdin-
gen 2005; Van Everdingen and Waarts
2003; Sivakumar and Nakata 2001).
In this study, we used the original Hof-
stede framework that consists of four
dimensions to describe culture: power
distance, uncertainty avoidance, indi-
vidualism/collectivism, and masculinity/
femininity.
Power distance centers on the extent
to which organization members feel
comfortable in interactions across hierar-
chical levels. When power distance is
high, employees feel that it is the man-
ager’s job to have the power and to make
the decisions, and when power distance
is low, employees feel that they should
be involved with the manager in
decision-making. Uncertainty avoidance
concerns the degree to which organiza-
tion members want to avoid ambiguity
and uncertainty in favor of clear goals
and operating guidelines. Individualism/
collectivism tracks the extent to which
327
people prefer to be treated as unique
individuals rather than as part of a
group. In collectivistic cultures, people
find comfort and energy in the group
setting, whereas in individualistic cul-
tures, people want to be able to stand
out as individuals and not be held back
by the group. Collectivism lies at one end
of a continuum with individualism at the
other.
Masculinity/femininity concentrates
on the degree to which people feel that
they should be results focused and insen-
sitive to emotions versus feeling that
they should be more nurturing, less
results focused, and more sensitive to
emotions. We prefer to label the
masculinity/femininity factor as asser-
tiveness focus as used by Randolph and
Sashkin (2002). Hence, in cultures of
high assertiveness focus, people tend to
be results oriented and insensitive to
others, whereas in cultures of low asser-
tiveness focus, people desire positive
relationships at work and place a higher
value on personal needs than on work
needs.
At the basic level, organizational
culture is constructed as a pattern of
shared managerial beliefs, values, and
assumptions (House et al. 2002; Schein
1992). Furthermore, cultural continuity
and coherence between organizations
and the society within which they
operate is an important aspect
addressed by some researchers (Aycan
et al. 2000; Aycan, Kanungo, and Sinha
1999). The model of cultural fit pro-
posed by those researchers suggests
that societal values influence organiza-
tional practices through the mediation
of internal organizational culture. Thus,
the model asserts that the organiza-
tional culture is inevitably influenced
by the societal culture. Accordingly,
recent research has used similar dimen-
sions for national and organizational
cultures, as the organizational culture is
seen as a reflection of the national
culture (see House et al. 2002; Aycan
328 JOURNAL OF SMALL BUSINESS MANAGEMENT
et al. 2000; Sigler and Pearson 2000;
Dorfman and Howell 1988). In this
study, organizational culture is based
on employee-related shared values
that are influenced by societal-level
culture.
Organizational Culture and
Innovation Capability
Culture has a profound impact on
innovation capability of a society or an
organization. Possession of positive
cultural characteristics provides the
organization with necessary ingredients
to innovate (Ahmed 1998). Culture has
multiple elements that can serve to
enhance or inhibit the tendency to
innovate. The literature on organiza-
tional innovation emphasizes the
importance of culture as a major deter-
minant in innovation performance
(Çakar 2006; Herbig and Dunphy 1998;
Branen 1991; Feldman 1988). So far, the
culture dimensions of Hofstede have
been applied in innovation studies
explaining national innovativeness
(Lynn and Gelb 1996), cross-national
consumer innovativeness (Steenkamp,
ter Hofstede, and Wedel 1999), and
adoption of innovation (Waarts and van
Everdingen 2005; Van Everdingen and
Waarts 2003).
Research (Hofstede 2001; Shane 1992)
indicated that countries with low power
distance have a greater tendency to inno-
vate. Because of centralized authority,
autocratic leadership, and many hierar-
chical levels, innovation capability of
organizations with high power distance
is expected to be very weak (Hofstede
1991). High levels of centralization and
formalization have been found to be
associated with lower rates of innovation
adoption (Waarts and van Everdingen
2005). Inventiveness is more likely to
occur in low power distance and less
bureaucratic surroundings, because
bureaucracy reduces creative activity.
Organizations that score high on the
power distance dimension tend to have
control systems based more on rules and
procedures, which inhibit creativity and
inventiveness (Herbig and Dunphy
1998). Therefore,
H1a: Power distance will be negatively
related to innovation capability.
Employees who perceive the power dis-
tance higher will report lower levels of
innovation capability.
Organizations in countries with high
uncertainty avoidance generally show
such features as the resistance to inno-
vations, highly formalized management,
and the constraining of innovations by
rules (Hofstede 2001). Hofstede (1980)
also proposed that low uncertainty
avoidance societies, which tend to take
risks easier, are relatively tolerant of
behavior and opinions different from
their own, and are enamored of technol-
ogy; these are the traits that encourage
innovation. In high uncertainty avoid-
ance cultures, risk-averse attitudes imply
that companies will not take avoidable
risks and only adopts innovations if its
effectiveness and value have already
been proven (Waarts and van Everdin-
gen 2005). Also, avoidance of uncer-
tainty has been found to be negatively
related to innovativeness (Mueller and
Thomas 2000; Thomas and Mueller
2000). Hence,
H1b: Uncertainty avoidance will be
negatively related to innovation capa-
bility. Employees who perceive the
uncertainty avoidance higher will
report lower levels of innovation
capability.
Organizations in countries with col-
lectivistic culture are characterized by
making collective decisions, which may
lead to a delay in the innovation deci-
sion process. Yet, in individualistic
countries, one prefers to be treated as a
unique individual, thus free to make
his/her own decisions. Employees of
ÇAKAR AND ERTÜRK
individualistic organizations have more
freedom to develop or try new products
than employees of organizations in col-
lectivistic countries (Waarts and van
Everdingen 2005; Van Everdingen and
Waarts 2003; Lynn and Gelb 1996). This
feature leads to the fact that patents are
more often granted in individualistic
than in collectivistic countries (Waarts
and van Everdingen 2005). Also, other
research has proposed that high indi-
vidualistic countries tend to be more
inventive in their products and pro-
cesses (Shane 1992). Similarly, collectiv-
ism was found to be negatively related
to innovativeness (Mueller and Thomas
2000; Thomas and Mueller 2000). The
psychological characteristics of in-
dependence, achievement, and non-
conformity, all of which have been
found to encourage innovation, are
more common in individualistic societ-
ies. So,
H1c: Collectivism will be negatively
related to innovation capability,
whereas individualism will be posi-
tively related to innovation capabil-
ity. Employees who perceive the
collectivism higher will report lower
levels of innovation capability.
Low assertiveness focus cultures are
characterized by values like equality,
solidarity, social relationships, use of
intuition, and seeking consensus. In con-
trast, ambition, competition, material
values, and focus on performance char-
acterize high assertiveness focus cultures
(Hofstede 2001). Organizations in high
assertiveness focus cultures, where
emphasis on rewards, recognition of per-
formance, training, and improvement of
the individual are common characteris-
tics, are innovative organizations (Waarts
and van Everdingen 2005). Other
research has also suggested a positive
relationship between achievement moti-
vation and innovativeness (Rogers 2004).
Hence,
329
H1d: Assertiveness focus will be posi-
tively related to innovation capabil-
ity. Employees who perceive the
assertiveness focus higher will report
higher levels of innovation capability.
Empowerment
The concept of empowerment has
gained increased popularity in the man-
agement field over the last decade (Wall,
Wood, and Leach 2004). Empowerment
focused on those management practices
designed to “empower” employees, such
as the delegation of decision-making and
the provision of increased access to
information and resources for individuals
at lower levels of the organization
(Bowen and Lawler 1992).
We define empowerment as an ener-
gizing process that expands the feelings
of trust and control in one as well as in
one’s organization, which leads to out-
comes such as enhanced self-efficacy and
performance (Eylon 1997). This process
is formed by contextual and relational
variables: the amount and quality of
information shared and the degree of
perceived responsibility and participa-
tion in decision-making, which are
underlying themes in most of the
empowerment research (Spreitzer 1996;
Conger and Kanungo 1988). So, in this
study, empowerment is constructed as
participation in decision-making and
access to information shared by the
management.
Organizational Culture and
Empowerment
Despite the extensive discussion
about the influence of management style
on organizational culture, there have
also been suggestions that organiza-
tional culture may in fact constrain dis-
plays of management styles. Pool (2000)
suggests that organizational culture pro-
vides the foundation for an organiza-
tion’s management system, that is,
management behavior reinforces prin-
ciples of the culture (Denison 1990). In
330 JOURNAL OF SMALL BUSINESS MANAGEMENT
fact, organizational culture is a combina-
tion of beliefs, values, and assumptions
shaping management styles and pro-
cesses in the organization (Aycan et al.
2000). Thus, managerial strategies and
processes are derived from the organiza-
tional culture.
The efficacy of empowerment in high
power distance cultures is doubtful
(Newman and Nollan 1996). Employees
in high power distance cultures are likely
to view participative management with
fear, distrust, and disrespect because par-
ticipation is not consistent with the
culture. Employees in high power dis-
tance culture expect their supervisors to
control information, make decisions, and
tell them what to do. High power dis-
tance may inhibit information sharing
between managers and subordinates
(Randolph and Sashkin 2002). However,
when power distance is low, people
may welcome involvement in decision-
making and enhance the movement to
empowerment. So, because cultures that
score high on power distance appear to
emphasize autocratic management style,
participative management techniques
like empowerment may not work in high
power distance cultures (Sagie and
Aycan 2003; Denison and Mishra 1995).
Hence,
H2a: Power distance will be negatively
related to empowerment. Employees
who perceive the power distance
higher will report lower levels of
empowerment.
When uncertainty avoidance is high,
people like to have managers sharing
information that clarifies and defines
assignments, goals, policies, and proce-
dures (Randolph and Sashkin 2002).
However, if uncertainty avoidance is
low, employees may be more than
willing to make key decisions using
information they do not understand, with
a potential risk. Therefore, by informa-
tion sharing and participation that
provide employees with clear goals,
roles, and a vision for guidance, employ-
ees in cultures with high uncertainty
avoidance find comfort in having
guidelines for their behavior. Indeed,
in cultures with high uncertainty avoid-
ance and low tolerance for ambiguity,
achieving empowerment will be easier
(Randolph and Sashkin 2002).
H2b: Uncertainty avoidance will be
positively related to empowerment.
Employees who perceive the uncer-
tainty avoidance higher will report
higher levels of empowerment.
Because empowerment focuses on
working in a collaborative environment,
individualism/collectivism dimension is
also critical for empowerment. Cultures
with strong individualism will have diffi-
culty moving to the team responsibility
that is essential for empowerment,
whereas cultures strong in collectivism
will find this shift much easier (Randolph
and Sashkin 2002). Employees in collec-
tivistic cultures share resources and
ideas, and are prepared to participate in
management for collective interests
(Sagie and Aycan 2003; Hofstede 1991).
On the contrary, in high individualist
organizations, employees prefer sharing
information that directly relates to their
jobs, especially if they are held account-
able for results. Hence,
H2c: Collectivism will be positively
related to empowerment, whereas
individualism will be negatively
related to empowerment. Employees
who perceive the collectivism higher
will report higher levels of
empowerment.
Because assertiveness focus describes
the degree to which people desire to
focus on results and achievements, its
impact on empowerment will likely not
be as strong as that of some other culture
elements (Randolph and Sashkin 2002).
ÇAKAR AND ERTÜRK
When assertiveness focus is high,
employees want to pay attention to
getting results so they can get their just
rewards and advance in their careers.
Thus, they desire clear task goals, task-
related information, and feedback on
results, and they prefer working as teams
to get real results and responsibilities.
Recent research proposed that people
with a high assertiveness focus welcome
information sharing about business
issues, participative managerial prac-
tices, and empowerment (Randolph
2000). Therefore,
H2d: Assertiveness focus will be posi-
tively related to empowerment.
Employees who perceive the assertive-
ness focus higher will report higher
levels of empowerment.
Empowerment and Innovation
Capability
In their research, some scholars have
suggested that supportive, participative,
vision-setting, democratic, and collabora-
tive management styles are effective in
encouraging innovation (Schin and
McClomb 1998; Van de Ven 1986). Jung,
Chow, and Wu (2003) also suggested that
empowerment was positively related to
support for innovation, whereas they
found a negative relationship between
empowerment and organizational inno-
vation. They explain this unexpected
finding in terms of cultural characteris-
tics of their sample, concluding that high
power distance may be one of the
reasons because employees in such an
environment may feel confused when
left alone to figure out what they need to
do and how to accomplish their goals in
terms of innovativeness.
There are several specific key prac-
tices aimed at building innovative behav-
iors; among those are empowerment
and involvement. Empowerment should
make people feel they possess a certain
degree of autonomy and power in
decision-making, feel less constrained by
331
rule-bound aspects, and self-effective in
enacting their work; combined, these
features enable people to be innovative
(Spreitzer 1995; Amabile and Grykiewicz
1989). Further, Ford and Randolph
(1992) proposed that empowerment was
very important to enhance innovative
performance. Key attributes of empow-
erment, such as open communication,
information sharing, participation in
decision-making processes, shared
vision, and common direction, are also
the key elements in fostering innovation
(Ahmed 1998). Moreover, Brunetto and
Farr-Wharton (2007) also suggested that
important outcomes of empowerment,
such as mutual trust and increased col-
laboration, are important factors for
innovation in SMEs.
Empowered individuals have been
shown to take more a proactive
approach toward shaping and influenc-
ing their work environment (Spreitzer,
Kizilos, and Nason 1997). As such,
Figure 1
Proposed Research Model
332 JOURNAL OF SMALL BUSINESS MANAGEMENT
empowerment is expected to be posi-
tively related to organizational innova-
tion (Damanpour 1991). For instance,
Amabile (1988) has found that having a
sense of control over what to do and
how to do one’s work enhance individu-
als’ capacity for innovative behavior.
Moreover, in a research conducted in
Australia, Knight-Turvey (2006) found
that empowerment and innovation were
strongly linked. Also, according to
another recent research, there exists a
strong positive relationship between par-
ticipative management practices and
innovative culture in small businesses
(Gudmunson, Tower, and Hartman 2003;
Ogbonna and Harris 2000; Claver et al.
1998). Therefore,
H3a: Empowerment will be positively
related to innovation capability.
Accordingly, the proposed research
model is depicted in Figure 1.
Examination of Research Model
Regarding Firm Size
Firm size affects the endowment of
important inputs for the innovation
process, such as money, facilities, and
human resource management practices
(Kotey and Folker 2007; Rogers 2004;
Capon et al. 1992). Several studies offer
an interesting debate on the relation-
ship between firm size and innovation
(Cohen and Klepper 1996; Acs and
Audretsch 1991). The origin of this
debate lies in the influential works of
Schumpeter (1934). In his first major
contribution, Schumpeter emphasized
the role of small firms and single entre-
preneurs as fundamental drivers of
innovation (Schumpeter 1934). Later,
Schumpeter changed this view, empha-
sizing the dominant role of large corpo-
rations in the monopolistic stage of
capitalism (Schumpeter 1942). Further
on, researchers have empirically proved
that large firms are more aggressive in
their innovation efforts (Wakasugi and
Koyata 1997; Cohen 1995) because
innovation activities are more produc-
tive in large firms as a result of comple-
mentaries between R&D and other
functional activities, such as marketing
and manufacturing. Moreover, larger
firms can earn higher returns on R&D
because of the advantages of cost
spreading. Cohen and Klepper (1996)
argued that the R&D expenditure of a
firm can be spread over its output;
hence, larger businesses gain higher
returns on their R&D. Furthermore,
Legge (2000) argued that through
their R&D efforts, large firms clearly
dominate process innovation, and then
go on to improve their innovation
performance.
On the contrary, both the excessive
bureaucratization and the lack of mana-
gerial control of large-scale R&D organi-
zations are usually recalled as possible
factors behind the low R&D productivity
performance of large firms. Furthermore,
ÇAKAR AND ERTÜRK
it has also been argued (and empirically
shown) that the disadvantages of small
firms in funding and undertaking R&D
activities could be offset by their ability
to exploit other sources of knowledge,
such as those stemming from learning
processes taking place at the shop-floor
level (Arrow 1962) and the technological
spillovers originated by large private and
public R&D laboratories (Audretsch and
Feldman 1996; Audretsch and Vivarelli
1996). Zenger and Lazzarini (2004) also
suggest that small firms employ more
innovative approaches in management,
such as compensation and promotion. As
for the innovative practices, a managerial
concentration on innovation is often
regarded to be a key factor for
product innovations (Hadjimanolis 2000;
Hoffman et al. 1998). Managers of small
firms have larger direct influence on
employees compared with managers of
large organizations. So, leaders in small
firms can inspire “entrepreneurial dyna-
mism” among employees (Davenport
and Bibby 1999).
This extended literature implies that
not only organizational innovation per-
formance itself but also organizational
factors that influence innovation perfor-
mance may vary depending on firm size.
However, the role of firm size in these
empirical studies is mostly deemed as a
regressor, such as an exploratory vari-
able, and what is aimed to examine in
this study is whether the combined
effects of culture and perceptions of
empowerment on innovation perfor-
mance vary with respect to firm size.
This study therefore sets out to examine
the relationship among organizational
culture, perceptions of empowerment,
and innovation capability in terms of
firm size. In contrast to the prior
research, samples of SMEs are analyzed
separately rather than considering firm
size as a moderator variable in order to
examine all possible relationships and
deeply investigate the differences among
all variables.
333
Methods
Organizational Context
After the customs union with the
European Union (EU) was put in place,
Turkish SMEs faced pressure in order to
meet European competition standards
and take advantage of opportunities in
the domestic market. Therefore, one of
the major priority areas for SME policies
of Turkey has been to strengthen SMEs’
innovativeness. In the SME Strategy and
Action Plan of Turkey issued in 2004,
KOSGEB (Small and Medium Industry
Development Organization of Turkey)
states that raising awareness about re-
search, technological development, and
innovations in SMEs is a major goal in
Turkey. The primary purpose of this goal
is to create innovative SMEs by encour-
aging them to invest in technology in
order to have them acquire a sustainable
competitive edge (see also Kozan,
Öksoy, and Özsoy 2006). Consequently,
it is critical that top management under-
stands and focuses on instruments at
addressing the issue of promoting inno-
vation in their companies.
SMEs in Turkey play a particularly
important role in economy, because of
their number and the large share of the
workforce involved. SMEs form the back-
bone of the private sector—representing
Table 1
Share of SMEs in Turkey by Economic Activity
Economic Activity of SMEs
Basic Metals
Textiles, Clothing, and Leather Products
Wood and Furniture
Food Products and Beverages
Paper and Paper Products
Others
Source: SIS 2004.
334 JOURNAL OF SMALL BUSINESS MANAGEMENT
by far the largest percentage of compa-
nies and employment in Turkey. Accord-
ing to the State Institute of Statistics (SIS)
data, there are around 210,000 SMEs
(1–250 workers) in the manufacturing
sector (SIS 2004). Only between the
years of 2003 and 2004, around 31,000
new firms were started throughout the
country. According to the Organisation
for Economic Co-operation and Develop-
ment (OECD) reports, the SME sector in
Turkey, including services, accounted, in
2000, for 99.5 percent of the total
number of enterprises, 76.7 percent of
total employment, 38 percent of capital
investment, and 26.5 percent of value
added (OECD 2004). Therefore, though
SMEs dominate the economy in terms of
employment, they generate relatively
low levels of value added and make only
a small contribution to Turkish exports.
SMEs in the manufacturing sector are
broken down across industries as in
Table 1.
Sample and Procedure
The Turkish SIS produces no wide-
range data on SMEs, partly because these
are defined differently by the various
organizations involved in SME policies
from one sector to another. The more
restrictive definitions are those of
Share (percent)
26.1
25.6
24.3
12.7
3.9
7.4
KOSGEB, the Undersecretariat of
Foreign Trade, and Eximbank, which
only cover manufacturing; the broadest
is that of the Undersecretariat of
Treasury, which, like the European
Observatory for SMEs, covers all of the
non-primary sector and uses the same
size classes. In this study, the latter is
considered as a definition for SMEs. That
is, enterprises in which the number of
employees is 49 and less are considered
as small, and enterprises where the
number of employees is between 50 and
249 are considered as medium-sized
enterprises (OECD 2004).
Data were acquired via a structured
questionnaire from both small and
medium-sized firms. All measurements
included in the questionnaire were origi-
nally developed in English and translated
into Turkish via the back-translation
technique, in which each questionnaire
was translated from English to Turkish
and then back-translated from Turkish to
English by another translator to see if it
still has the same meaning (see Brislin
1980). Wordings of the items are
modified slightly to emphasize that the
evaluations reflect the respondents’
expectations regarding their respective
organizations. Afterward, a pilot study
was conducted. As the result of the pilot
study, it was accepted that question-
naires were easily understood by manag-
ers and employees, because there were
no questions or any other recommenda-
tions regarding the questionnaires.
The data were collected via face-to-
face interviews (using standardized ques-
tionnaires) with multiple informants
(top-level managers and at least three
more employees) from manufacturing
departments of 43 small-sized and 50
medium-sized firms from 13 different
industries (e.g., machinery and equip-
ments, packaged food products, chemi-
cal products, household appliances,
textiles, and automotive) located within
the Kocaeli, Sakarya, and Bolu industrial
district of Turkey. A cover letter was
ÇAKAR AND ERTÜRK
provided to explain the purpose of the
survey, and note that participation was
voluntary as all participants were assured
of confidentiality. No personal data were
collected except for demographics.
Small-Sized Enterprises Sample. For the
firm-level analysis, 43 small-sized firms
are taken as the sample. As the
individual-level sample, a total of 294
completed questionnaires were analyzed
with a response rate of 36 percent. As
to the individual respondents, 24 are
top-level managers, 160 are senior or
mid-level managers, 73 are white-collar
employees, and 37 are blue-collar
employees. The sample consisted of 78
percent men, and 55 percent of partici-
pants were aged 18–35 years. Seventy-
eight percent of participants had worked
at their organizations for a period of
1–10 years.
Medium-Sized Enterprises Sample. For
the firm-level analysis, 50 medium-sized
firms are taken as the sample. As the
individual-level sample, a total of 449
completed questionnaires were analyzed
with a response rate of 33 percent. As to
the individual respondents, 9 are top-
level managers, 297 are senior or mid-
level managers, 111 are white-collar
employees, and 32 are blue-collar
employees. The sample consisted of 81
percent men, and 60 percent of partici-
pants were aged 18–35 years. Eighty-one
percent of participants had worked at
their organizations for a period of 1–10
years.
For both samples, nonresponse bias
was assessed (1) on the company level
by comparing the proportion of firms
from each industry for the firm-level
analysis, and (2) on the individual level
within the company by comparing the
number of respondent and nonrespon-
dent employees, and their demographic
characteristics (i.e., age, gender, educa-
tion, and organizational tenure) in each
firm with the average industry figures of
335
the sampling frame for the individual-
level analysis. The appropriate t-tests
(pair-wise or independent samples tests,
depending on the nature of comparison)
indicated no significant differences.
Measures
All constructs were measured with
questions adapted from existing scales.
All items were measured on a five-point
Likert-type scale where 1 = strongly
disagree and 5 = strongly agree. All
measurement items, including power dis-
tance, collectivism, assertiveness focus,
uncertainty avoidance, empowerment,
and innovation capability, are presented
in Appendix A.
Independent Variables
Empowerment. Empowerment was
tapped by a five-item measure adapted
from the scale originally developed by
Denison (2000). Scores range from 1 to
5, with 5 indicating the comprehensive
application of empowerment.
Organizational Culture. In this study,
organizational culture was measured as
four distinct dimensions, namely, power
distance, individualism/collectivism,
uncertainty avoidance, and assertiveness
focus. Those dimensions were tapped
with scales adapted from the measures
developed and tested by Erez and Earley
(1987); Chen, Meindl, and Hui (1998);
Wagner (1995); Sigler and Pearson
(2000); Robbins and Mukerji (1994);
Dorfman and Howell (1988); and Yilmaz,
Alpkan, and Ergun (2005).
Power Distance. Power distance scale
included eight items that measure the
extent to which less powerful members
of the organization accept the unequal
distribution of power. Scores range from
1 to 5, with 5 indicating that less power-
ful members of the organization strongly
accept the unequal distribution of power
across the hierarchy.
336 JOURNAL OF SMALL BUSINESS MANAGEMENT
Collectivism. Collectivism scale inclu-
ded seven items that measure the extent
to which people prefer to be treated as
part of a group rather than as unique
individuals. Collectivism lies at one end
of a continuum with individualism at the
other. Scores range from 1 to 5, with 5
indicating that employees strongly prefer
to be treated as part of a group instead of
a unique individual and with 1 indicating
that employees strongly prefer to be able
to stand out as individuals.
Assertiveness Focus. Assertiveness fo-
cus scale, which implies the masculinity/
femininity dimension of Hofstede’s
(1980) cultural framework, included
eight items that measure the extent to
which people feel that they should be
results focused and insensitive to emo-
tions. Scores range from 1 to 5, with 5
indicating that employees strongly feel
that they should be results oriented and
insensitive to emotions.
Uncertainty Avoidance. Uncertainty
avoidance measure included nine items
that measure the extent to which organi-
zation members want to avoid ambiguity
and uncertainty in favor of clear goals
and operating guidelines. Scores range
from 1 to 5, with 5 indicating that
members of the organization precisely
want to avoid vagueness and strongly
want to have obvious guidelines.
Dependent Variable
Innovation Capability. Although some
of the researchers consider objective
measures to measure qualitative organi-
zational performance, perceived values
of organizational performance may well
be used (Kathuria 2000; Denison 1997).
Accordingly, as to firms’ innovation capa-
bility, two items (R&D expenditures and
firms’ new product development capac-
ity) adapted from Denison (2000) are
used to assess the average level of firm
innovation capability within the preced-
ing three years, using five-point scales
anchored at much worse than competi-
tion (=1) and much better than competi-
tion (=5).
Level of Analysis
Both individual and firm-level ante-
cedents of innovation capability were
investigated in previous studies; how-
ever, a large amount of studies regarding
the relationship between organizational
culture and innovation were conducted
on the firm level. Conducting a firm-
based case study, Dombrowski et al.
(2007) indicated that dimensions of inno-
vation culture need to be considered at
the firm level. Moreover, supporting Har-
gadon and Sutton (1997), they imply that
innovative culture starts to shape on the
individual level; however, it reflects col-
lective beliefs and values of any organi-
zation. In other words, organizational
culture may be different from the values
and beliefs of a single employee. Further,
in their individual-level study, Clegg et al.
(2002) suggested that trust and effective
communication between organizational
members better facilitate the manage-
ment of organizational innovation
process. On the contrary, Waarts and van
Everdingen (2005) indicated on the firm
level that organizations, where collective
decisions are low, are more innovative
because of their social mobility across
organizational boundaries. These argu-
ments reinforce the notion that culture’s
effects on innovative capability may vary
depending on the unit of analysis.
In this study, individuals and firms
were taken as the units of analysis level.
In other words, we performed both indi-
vidual and firm-level analyses on the
acquired data set, where the units of
analyses are companies and employees.
This procedure will certainly increase
our understanding and provide signifi-
cant insights into the intra-company
variation of responses versus inter-
company variation. In order to conduct
the firm-level analysis, firm-level data
were created by grouping the data gath-
ered from the employees belonging to
the same firm. Thus, in the following
sections, we report the results of both
individual-level and firm-level analyses
on the samples.
At the first stage, we calculated
means, standard deviations, and Cron-
bach’s alpha reliabilities of the scales on
the firm level and summarized them in
Table 2.

Table 2
Means, Standard Deviations (S.D.), and Reliabilities of
Established Measures on the Firm Level
Variables Small-Sized Medium-Sized
Enterprises Enterprises

Means S.D. Alpha Means S.D. Alpha

Power Distance 2.82 0.29 0.88 2.88 0.20 0.78

Individualism/Collectivism 3.78 0.21 0.81 3.65 0.34 0.75
Assertiveness Focus 2.46 0.35 0.72 2.78 0.32 0.83
Uncertainty Avoidance 3.79 0.28 0.91 3.82 0.25 0.86
Empowerment 3.63 0.18 0.74 3.55 0.19 0.73
Innovation Capability 3.49 1.04 — 3.72 0.55 —

ÇAKAR AND ERTÜRK 337

Factor Analyses
In order to increase the validity and
reliability of factor structures, both
exploratory and confirmatory factor
analyses were performed on the
samples. For the exploratory factor
analysis, SPSS 11.0 (SSPS Inc., and IBM
Company, Chicago, Ill., USA) was used.
For the confirmatory factor analysis and
to test the proposed hypotheses, struc-
tural equation modeling (SEM) was
employed. The Analysis of Moment
Structures (AMOS version 7.0, AMOS
Development Corporation, Spring
House, Penn., USA) program was used
to develop and test all structural models
using the maximum likelihood estima-
tion procedure.
Prior to the estimation of the confir-
matory measurement model, exploratory
factor analyses are conducted for each
sample to assess unidimensionality. In
each of these analyses, a single factor is
extracted (using a cutoff point of eigen-
value = 1), suggesting that our measure-
ment scales are unidimensional. Next,
consistent with our measurement theory,
the 32 items measuring the organiza-
tional culture factors (power distance,
uncertainty avoidance, individualism/
collectivism, assertiveness focus) are
hypothesized to load on four distinct
factors in the measurement model. In
addition, five items measuring empower-
ment and two items measuring innova-
tion capability are averaged to create
composite indicants for each of these
formative measures, which are then
posited to load on two distinct perfor-
mance factors in the measurement
model.
On the individual-level analysis,
alpha reliabilities for the scales ranged
from 0.76 to 0.86 and factor loadings of
items varied from 0.502 to 0.793 for
small-sized enterprises, whereas alpha
reliabilities for the scales ranged from
0.72 to 0.87 and factor loadings of
items varied from 0.482 to 0.757 for the
338 JOURNAL OF SMALL BUSINESS MANAGEMENT
medium-sized enterprises. On the firm-
level analysis, alpha reliabilities for the
scales ranged from 0.72 to 0.91 and
factor loadings of items varied from
0.410 to 0.841 for small-sized enter-
prises, whereas alpha reliabilities for
the scales ranged from 0.73 to 0.86 and
factor loadings of items varied from
0.402 to 0.879 for the medium-sized
enterprises.
Both individual-level and firm-level
intercorrelations among the established
measures are depicted in Table 3.
Confirmatory Factor Analysis
Five goodness-of-fit indices were
used to assess the model fit of struc-
tural models: (1) chi-square value (c2),
(2) root mean square error of approxi-
mation (RMSEA), (3) non-normed fit
index (NNFI), (4) goodness of fit index
(GFI), and (5) comparative fit index
(CFI) (Hu and Bentler 1999; Hox and
Bechger 1998; Kline 1998; Arbuckle and
Wothke 1995). Moreover, for overall
assessment of fit, the chi-square to
degrees of freedom ratio (c2/df) is also
checked, and ratios under 3:1 typically
are considered to represent a reason-
ably good fit (Carmines and McIver
1981).
For the small-sized enterprises
sample, at the end of confirmatory factor
analysis, the suggested six-factor model
results in a significant chi-square statistic
on both the individual-level and firm-
level analyses (for individual level,
c2 = 1,228.8, p < .01, df = 619; for firm
level, c2 = 1,602.9, p < .01, df = 619). The
resulting goodness-of-fit indices suggest
that the model fits the observed covari-
ances well on both the individual-level
and firm-level analyses (for individual
level, c2/df = 1.98, CFI = 0.90, GFI = 0.92,
NNFI = 0.89, RMSEA = 0.05; for firm
level, c2/df = 2.59, CFI = 0.88, GFI = 0.90,
NNFI = 0.85, RMSEA = 0.08). In addition,
all items load significantly on their
respective constructs (with the lowest
t-value being 5.98 on the individual level
 Table 3
Intercorrelations among Established Measures on Both the
Individual Level and Firm Level
Variables ICA I/C PD UA AF EP

Individual-Level Results
ICA 1 0.262** -0.189** -0.419** -0.083 0.342**
I/C 0.435** 1 -0.272** 0.499** -0.079 0.492**
PD -0.394** -0.425** 1 -0.257** 0.332** -0.336**
UA -0.572** 0.589** -0.408** 1 -0.114* 0.431**
AF -0.063 -0.153** 0.369** -0.183** 1 -0.089
EP 0.413** 0.498** -0.334** 0.478** -0.060 1
Firm-Level Results
ICA 1 0.159 -0.204 -0.478** -0.119 0.312*
I/C 0.490** 1 -0.038 0.365** -0.130 0.231*
PD -0.352* -0.655** 1 -0.283* 0.232* -0.190*
UA -0.778** 0.703** -0.479** 1 -0.090 0.309*
AF 0.328* -0.419** 0.526** -0.330** 1 -0.111
EP 0.620** 0.461** -0.252 0.630** 0.049 1

*Correlation is significant at the 0.05 level.

**Correlation is significant at the 0.01 level.
For both individual-level and firm-level results, the lower left half of the table shows
the correlations in the small-sized enterprises sample, whereas the upper right half
of the table shows the correlations in the medium-sized enterprises sample.
ICA, innovation capability; I/C, individualism/collectivism; PD, power distance; UA,
uncertainty avoidance; AF, assertiveness focus; EP, empowerment.

and 4.12 on the firm level), providing
support for the convergent validity of
measurement items on both the indi-
vidual and firm level.
For the medium-sized enterprises
sample, suggested six-factor model also
results in a significant chi-square statis-
tic on both the individual-level and
firm-level analyses (for individual level,
c2 = 1,228.8, p < .01, df = 619; for firm
level, c2 = 1,425.2, p < .01, df = 619).
The resulting goodness-of-fit indices
suggest that the model fits the observed
covariances well on both the individual-
level and firm-level analyses (for indi-
vidual level, c2/df = 1.98, CFI = 0.90,
GFI = 0.92, NNFI = 0.89, RMSEA = 0.05;
for firm level, c2/df = 2.30, CFI = 0.89,
GFI = 0.88, NNFI = 0.86, RMSEA = 0.07).
In addition, all items load significantly
on their respective constructs (with
the lowest t-value being 4.69 on the
individual level and 4.54 on the firm
level), providing support for the
convergent validity of measurement
items on both the individual and firm
level.
Finally, for both samples on both the
individual and firm level, discriminant
validity is obtained for all constructs
because the variance extracted for each
construct is greater than its squared cor-
relations with other constructs (Fornell
and Larcker 1981).

ÇAKAR AND ERTÜRK 339

Multi-Collinearity Tests
Before going further with regression
analyses, multi-collinearity tests were
performed. The statistics generally
employed to test for collinearity is the
variance inflation factor (VIF) and the
condition index (CI). The VIF is an index
of the degree of inflation of the variance
of parameter estimates that results from
the correlation between two predictor
variables; variances that are too high can
result in unstable parameter estimates. A
VIF larger than 10.0 is the generally
accepted value indicating a problem of
collinearity (Kleinbaum et al. 1998; Hair
et al. 1992). In our study, VIFs ranged
from 1.17 to 1.76 on the individual level
and from 1.41 to 2.83 on the firm level
for the small-sized enterprises sample
and from 1.12 to 1.53 on the individual
level and from 1.07 to 1.31 on the firm
level for the medium-sized enterprises
sample, well below the threshold value
of 10.0.
In addition, CI is also used to test for
the presence of collinearity. The CI is an
index of the dependency of one variable
on the others. Thus, like the VIF, large
condition indices (>30) indicate inflation
in the standard error of the parameter
estimate of a variable (Tebachnick and
Fidell 2001; Pedhazur and Schmelkin
1991). Fortunately, in the present
sample, the largest CI was 22.87 on the
individual level and 24.67 on the firm
level for the small-sized enterprises
sample and 20.01 on the individual level
and 26.18 on the firm level for the
medium-sized enterprises sample; thus,
there is no need to examine variance
proportions. Together, these two col-
linearity diagnostics indicate little
problem associated with multi-
collinearity in the present data.
Tests of Hypotheses
Both on the individual level and firm
level, we estimate the path coefficients
linking the study constructs using the
structural equations modeling methodol-
340 JOURNAL OF SMALL BUSINESS MANAGEMENT
ogy in AMOS 7.0. First, the proposed
model in Figure 1 was separately tested
for each of two samples representing the
small-sized enterprises (on individual
level n = 294, on firm level n = 43) and
the medium-sized enterprises (on indi-
vidual level n = 449, on firm level
n = 50). The chi-square statistics and the
overall model fit statistics for the pro-
posed model of both samples are sum-
marized in Table 4.
Individual-Level Analysis of
Small-Sized Enterprises Sample
For the small-sized enterprises sample
on the individual level, the chi-square
statistic obtained from the estimation of
the proposed model is significant
(c2 = 84.0, p < .01, df = 1). Also, accord-
ing to the goodness-of-fit indices (see
Table 4), the proposed model is statisti-
cally rejected. After eliminating the non-
significant paths between the variables, a
revised model is obtained. The chi-
square statistic obtained from the
estimation of the revised model is non-
significant (c2 = 3.5, p > .1, df = 3), and
the goodness-of-fit indices (see Table 4)
suggest a good model fit. Revised model
for small-sized enterprises sample on the
individual level is depicted in Figure 2.
The parameter estimates for the hypoth-
esized paths are provided in Table 5. As
shown in Table 5, for small-sized enter-
prises on the individual level, H1a, H2a,
H1b, H2b, H2c, and H3a are supported,
whereas H1c, H1d, and H2d are not sta-
tistically supported.
Firm-Level Analysis of Small-Sized
Enterprises Sample
For the small-sized enterprises sample
on the firm level, the chi-square statistic
obtained from the estimation of the pro-
posed model is significant (c2 = 23.5,
p < .01, df = 1). Also, according to the
goodness-of-fit indices (see Table 4), the
proposed model is statistically rejected.
After evaluating the model and eliminat-
ing the nonsignificant paths between the
 Table 4
Chi-Square Statistics and the Goodness-of-Fit Indices for
Structured Models on Both Individual Level and
Firm Level
c2 df c2/df CFI GFI NNFI RMSEA

Individual-Level Results
Mproposed-sse-il 84.0* 1 84.0 0.83 0.84 0.81 0.26
Mproposed-mse-il 49.4* 1 49.4 0.84 0.85 0.86 0.16
Mrevised-sse-il 3.5 3 1.17 0.99 0.99 0.98 0.02
Mrevised-mse-il 1.5 4 0.37 0.99 0.99 0.99 0.01
Firm-Level Results
Mproposed-sse-fl 23.5* 1 23.5 0.81 0.87 0.82 0.43
Mproposed-mse-fl 29.7* 1 29.7 0.83 0.82 0.84 0.26
Mrevised-sse-fl 2.6 3 0.87 1.00 0.98 0.98 0.01
Mrevised-mse-fl 2.8 4 0.71 1.00 0.98 0.96 0.01

*Statistic is significant at 0.01 level.

CFI, comparative fit index; GFI, goodness of fit index; NNFI, non-normed fit index;
RMSEA, root mean square error of approximation; Mproposed-sse-il, proposed model for
small-sized enterprises on the individual level (illustrated on Figure 1); Mproposed-mse-il,
proposed model for medium-sized enterprises on the individual level (illustrated on
Figure 1); Mrevised-sse-il, revised model for small-sized enterprises on the individual level
(illustrated on Figure 2); Mrevised-mse-il, revised model for medium-sized enterprises on
the individual level (illustrated on Figure 3); Mproposed-sse-fl, proposed model for small-
sized enterprises on the firm level (illustrated on Figure 1); Mproposed-mse-fl, proposed
model for medium-sized enterprises on the firm level (illustrated on Figure 1);
Mrevised-sse-fl, revised model for small-sized enterprises on the firm level (illustrated on
Figure 2); Mrevised-mse-fl, revised model for medium-sized enterprises on the firm level
(illustrated on Figure 3).

variables, a revised model is obtained.
The chi-square statistic obtained from
the estimation of the revised model is
nonsignificant (c2 = 2.6, p > .1, df = 3),
and the goodness-of-fit indices (see
Table 4) suggest a good model fit.
Revised model for small-sized enter-
prises sample on the firm level is also
depicted in Figure 2. Firm-level param-
eter estimates for the hypothesized paths
are also provided in Table 5. As shown in
Table 5, for small-sized enterprises on
the firm level, H1b, H2b, H1c, H2c, H2d,
and H3a are supported, whereas H1a,
H2a, and H1d are not statistically sup-
ported.
Individual-Level Analysis of
Medium-Sized Enterprises Sample
For the medium-sized enterprises
sample on individual level, the
chi-square statistic obtained from the
estimation of the proposed model is sig-
nificant (c2 = 49.4, p < .01, df = 1). Also,
according to the goodness-of-fit indices
(see Table 4), the proposed model is sta-
tistically rejected. After evaluating the
model and eliminating the nonsignificant

ÇAKAR AND ERTÜRK 341

 Figure 2
Revised Model for Small-Sized Enterprises Sample

*p < .05; **p < .01. Statistically significant paths on the individual level are shown as
intermittent lines. Statistically significant paths on the firm level are shown as
continuous lines, and firm-level coefficients are underlined.

paths between the variables, a revised of the proposed model is significant

model is obtained. The chi-square statis-
tic obtained from the estimation of the
revised model is nonsignificant (c2 = 1.5,
p > .1, df = 4), and the goodness-of-fit
indices (see Table 4) suggest a good
model fit. Revised model for medium-
sized enterprises sample on the indi-
vidual level is presented in Figure 3. The
parameter estimates for the hypothesized
paths are summarized in Table 5. As
shown in Table 5, for medium-sized
enterprises on the individual level, the
results yield that H2a, H1b, H2b, H2c,
and H3a are supported, whereas H1a,
H1c, H1d, and H2d are not statistically
supported.
Firm-Level Analysis of
Medium-Sized Enterprises Sample
For the medium-sized enterprises
sample on the firm level, the chi-square
statistic obtained from the estimation
(c2 = 29.7, p < .01, df = 1). Also, accord-
ing to the goodness-of-fit indices (see
Table 4), the proposed model is statisti-
cally discarded. A revised model is
acquired by eliminating the nonsignifi-
cant paths between the variables. The
chi-square statistic obtained from the
estimation of the revised model is non-
significant (c2 = 2.8, p > .1, df = 4), and
the goodness-of-fit indices (see Table 4)
suggest a good model fit. Revised
model for medium-sized enterprises
sample on the firm level is also pre-
sented in Figure 3. Firm-level parameter
estimates for the hypothesized paths
are also presented in Table 5. As
shown in Table 5, for medium-sized
enterprises on the firm level, the results
yield that H2a, H1b, H2b, H2c, and
H3a are supported, whereas H1a, H1c,
H1d, and H2d are not statistically
supported.

342 JOURNAL OF SMALL BUSINESS MANAGEMENT

 Table 5
Parameter Estimates on Both Individual Level and Firm Level
Hypothesis Hypothesized Path Parameter t-Value Explanation Parameter t-Value Explanation
Estimate Estimate

Small-Sized Enterprises sample Individual-Level Results Firm-Level Results

H1a Power Distance → Innovation Capability -0.188 -2.781** Supported -0.032 -0.915 Not Supported
H1b Uncertainty Avoidance → Innovation -0.668 -6.718** Supported -0.723 -6.859** Supported
Capability
H1c Collectivism → Innovation Capability -0.087 -1.015 Not Supported -0.143 -3.014** Supported
H1d Assertiveness Focus → Innovation -0.019 -0.301 Not Supported -0.052 -1.164 Not Supported
ÇAKAR AND ERTÜRK

Capability
H2a Power Distance → Empowerment -0.101 -2.214* Supported -0.020 -0.526 Not Supported
H2b Uncertainty Avoidance → Empowerment 0.302 4.286** Supported 0.619 5.779** Supported
H2c Collectivism → Empowerment 0.291 4.860** Supported 0.202 2.413* Supported
H2d Assertiveness Focus → Empowerment 0.071 1.155 Not Supported 0.110 1.986* Supported
H3a Empowerment → Innovation Capability 0.218 2.792** Supported 0.221 2.916** Supported
Medium-Sized Enterprises Sample
H1a Power Distance → Innovation Capability -0.041 -0.787 Not Supported -0.091 -1.481 Not Supported
H1b Uncertainty Avoidance → Innovation -0.480 -6.542** Supported -0.423 -5.946** Supported
Capability
H1c Collectivism → Innovation Capability -0.009 -0.136 Not Supported -0.014 -0.777 Not Supported
H1d Assertiveness Focus → Innovation -0.012 -0.364 Not Supported -0.078 -1.254 Not Supported
Capability
H2a Power Distance → Empowerment -0.162 -4.616** Supported -0.124 -2.805** Supported
H2b Uncertainty Avoidance → Empowerment 0.233 4.779** Supported 0.223 3.694** Supported
H2c Collectivism → Empowerment 0.320 7.267** Supported 0.149 1.889* Supported
H2d Assertiveness Focus → Empowerment 0.029 0.682 Not Supported 0.047 0.983 Not Supported
H3a Empowerment → Innovation Capability 0.258 3.728** Supported 0.204 3.112** Supported
343

*Parameter estimate is significant at the 0.05 level.

**Parameter estimate is significant at the 0.01 level.
 Figure 3
Revised Model for Medium-Sized Enterprises Sample

*p < .05; **p < .01. Statistically significant paths on the individual level are shown as
intermittent lines. Statistically significant paths on the firm level are shown as
continuous lines, and firm-level coefficients are underlined.

Examination of Mediating Effect of components; such as power distance,

Empowerment
Results of the aforementioned SEM
analysis revealed a mediating effect of
empowerment on the relationship
between organizational culture and inno-
vation capability for SMEs samples on
both the individual-level and firm-level
analyses. Thus, in order to confirm and
support this finding, we performed the
Sobel test by using the automated Web-
based Sobel test available on the Internet
(Web-based Sobel Test 2007). The
purpose of the Sobel test is to examine
whether the mediator carries the influ-
ence of an independent variable to a
dependent variable (Sobel 1982). The
Sobel’s t-value must be adequately large,
yielding a p-value of less than 0.05, in
order for significant mediation to be
identified. For this study, it means
that the association between indepen-
dent variables (organizational culture
collectivism, assertiveness focus, and
uncertainty avoidance) and the depen-
dent variable (innovation capability)
has been significantly reduced by the
inclusion of the mediating variable
(empowerment).
As results of the Sobel test conducted
for small-sized enterprises sample, calcu-
lated t-values for the independent vari-
ables varied from 3.17 to 6.79 ( p < .05)
on the individual level and varied from
2.89 to 5.34 ( p < .05) on the firm level for
the mediation of empowerment on the
relationship between three organiza-
tional culture components and innova-
tion capability. Therefore, on the
individual-level analysis, the partial
mediating effect of empowerment on the
relationships between (1) power distance
and innovation capability, and (2)
uncertainty avoidance and innovation
capability, and the full mediating effect

344 JOURNAL OF SMALL BUSINESS MANAGEMENT

of empowerment on the relationship
between collectivism and innovation
capability have been found to be signifi-
cant. However, on the firm-level analysis,
the partial mediating effect of empower-
ment on the relationships between (1)
collectivism and innovation capability,
and (2) uncertainty avoidance and inno-
vation capability, and the full mediating
effect of empowerment on the relation-
ship between assertiveness focus and
innovation capability have been found to
be significant.
For medium-sized enterprises sample,
calculated t-values varied from 4.42 to
7.56 ( p < .05) on the individual level
and varied from 4.16 to 6.89 ( p < .05)
on the firm level for the mediation of
empowerment. For the medium-sized
enterprises sample, on both the
individual-level and firm-level analysis,
the partial mediating effect of empow-
erment on the relationship between
uncertainty avoidance and innovation
capability, and the full mediating effect
of empowerment on therelationships
between (1) power distance and innova-
tion capability, and (2) collectivism and
innovation capability have been found
to be significant.
Multigroup Analysis
On the surface, models of SMEs
samples appear similar to each other
for both the individual-level and firm-
level analyses. However, subtle discrep-
ancies were present in the strengths of
individual paths. To test if the path
coefficients of these two models were
in fact significantly different from each
other, multiple group analysis was con-
ducted. A multigroup baseline model
with the parameters across two samples
free estimated was first established. A
chi-square difference test reveals a sig-
nificant difference across the baseline
and the constrained models for both
SMEs samples on both the individual
and firm-level analyses ( p < .01). This
suggests that the magnitude and signifi-
ÇAKAR AND ERTÜRK
cance of the individual relationships are
not the same for the small and the
medium-sized enterprises models. In
order to facilitate the interpretation of
the findings acquired from both the
individual and firm-level analyses of
SMEs samples, results are presented in
Table 6.
Discussion and
Conclusion
Innovative culture is a way of thinking
and behaving that creates, develops, and
establishes values and attitudes within a
firm that may require rising, accepting,
and supporting new ideas involving an
improvement in the functioning and
management of the firm. These changes
may mean conflict with conventional and
traditional employee behavior; however,
they may in turn create highly effective
cultural and managerial transformations
regarding innovativeness. The primary
objective of this study was to identify
such firm-specific effects as organiza-
tional culture and empowerment percep-
tions on innovation capability in small
and medium-sized firms. To achieve this
objective, SEM analyses were applied to
samples of Turkish small and medium-
sized firms in order to empirically test,
and compare direct and indirect effects.
The findings of this study provide infor-
mation about the patterns of enhancing
innovation capability of SMEs both by
considering combined effects of organi-
zational culture and empowerment per-
ceptions, and comparing small and
medium-sized organizations in terms of
these combined effects on innovation
capability.
In general, for both SMEs, uncer-
tainty avoidance is negatively related to
innovation capability and positively
related to empowerment. This implies
that the more employees tend to avoid
uncertainty, the more they perceive
that they participate in the decisions
effecting their tasks. In this case,
empowering employees was perceived
345
 Table 6
Statistically Significant Relationships Revealed on
Individual and Firm-Level Analyses of Small and
Medium-Sized Enterprises Samples
Individual-Level Analysis Firm-Level Analysis

Small-Sized n = 294
EnterprisesPower distance, uncertainty
Sample avoidance, and empowerment
directly affect innovation
capability.
Power distance, collectivism, and
uncertainty avoidance directly
affect empowerment.
Empowerment fully mediates
collectivism.
Empowerment partially mediates
power distance and
uncertainty avoidance.
Medium-sized n = 449
Enterprises Uncertainty avoidance, power
Sample distance, and empowerment
directly affect innovation
capability.
Collectivism and uncertainty
avoidance directly affect
empowerment.
Empowerment fully mediates
power distance and
collectivism.
Empowerment partially mediates
uncertainty avoidance.
n = 43
Collectivism, uncertainty
avoidance, and empowerment
directly affect innovation
capability.
Assertiveness focus, collectivism,
and uncertainty avoidance
directly affect empowerment.
Empowerment fully mediates
assertiveness focus.
Empowerment partially mediates
collectivism and uncertainty
avoidance.
n = 50
Uncertainty avoidance, power
distance, and empowerment
directly affect innovation
capability.
Collectivism and uncertainty
avoidance directly affect
empowerment.
Empowerment fully mediates
power distance and
collectivism.
Empowerment partially mediates
uncertainty avoidance.

to contribute the most to individuals’ belonging, and job safety. However,

professional development as well as
societal change and advancement.
Further, employees who are able to
easily achieve relevant information
regarding their activities may also
require feedback from supervisors and
managers, which results in a high level
of empowerment perceptions. Accord-
ingly, they are motivated and empow-
ered by praise from the supervisor,
feedback on performance, sense of
employees find certain tasks, formal
rules, and job descriptions as threats for
creativity and achieving innovativeness.
They are sure that standardized rules
and certain procedures may inhibit to
develop new ideas and to adapt chang-
ing organizational environment.
In this study, empowerment is consid-
ered as an antecedent of innovation
capability and a consequence of organi-
zational culture; however, the mediating

346 JOURNAL OF SMALL BUSINESS MANAGEMENT

effects of empowerment on innovation
capability were also revealed at the end
of SEM analyses. Thus, we performed
appropriate Sobel tests, and the results of
the Sobel test also confirmed that the
mediating effect of empowerment is sig-
nificant for both samples. For both
samples, collectivism is found to be posi-
tively related to empowerment; however,
no significant relationship is found
between collectivism and innovation
capability. This finding implies that
empowerment fully mediates the rela-
tionship between collectivism and inno-
vation capability in both samples (see
also Baron and Kenny 1986). In other
words, sense of collectivism among orga-
nizations’ members increase innovation
capability because they perceive that
they are valued and participated in spe-
cific decisions. The SEM results further
show that for both samples, no signifi-
cant link is found from assertiveness
focus to empowerment and innovation
capability.
In contrast to the similarities men-
tioned already, there are several contra-
dictions among samples, specifically
regarding the relationships between
power distance and innovation perfor-
mance. The results reveal that power
distance is negatively related to empow-
erment and innovation capability for the
small-sized enterprises sample; however,
in the medium-sized enterprises sample,
power distance is only negatively related
to empowerment, and no significant rela-
tionship is found between power dis-
tance and innovation capability. This
difference may stem from the notion that
in small firms, which are able to better
understand and assimilate knowledge
flows and have fluid communication
between managers and lower level
employees, reflecting low power dis-
tance, innovation capability is more
likely to increase directly via close
employee–manager relationships. Al-
though Turkey was shown to have a high
power distance culture (Hofstede 1980),
ÇAKAR AND ERTÜRK
in small organizations, organizational
culture reflects “family-friendly” relation-
ships (Aycan et al. 2000). Family-like
climate in small firms implies that man-
agers are concerned with and involved in
the professional as well as personal lives
of their subordinates. In such an organi-
zational setting, employees become more
positive to the managers’ decisions
regarding innovations, and they increas-
ingly tend to be a part of the innovation
process. On the other side, in medium-
sized firms, innovation capability is more
likely to be facilitated and increased
through formal procedures of employee
participation and knowledge sharing. As
opposed to small-sized organizations,
this sample seeks participation in
“decision-making” rather than “power
and authority” as a primary criteria to
innovate effectively. This also implies
that empowerment fully mediates the
relationship between power distance and
innovation capability in medium-sized
firms. In other words, gaining power and
authority in larger organizations increase
innovativeness not directly but through
empowerment.
Firm-level analysis of the small-sized
enterprises sample has yielded a nega-
tive effect of collectivism on innovation
capability. It seems logical for small-
sized enterprises, because collectivistic
features, which may lead to a delay in
the innovation decision process, are
likely to be more significant in small-
sized enterprises than those in medium-
sized enterprises. Another important
finding is the statistically significant
effect of assertiveness focus on em-
powerment on the firm level. From a
firm-level perspective, it is so reasonable
to be result oriented and placing more
value on work needs than personal
needs, which are important on the
individual level.
Another interesting finding about the
differences between the individual-level
and firm-level results of the small-sized
enterprises sample is that power
347
distance has statistically significant
effects on both empowerment and inno-
vation capability on the individual-level
analysis, whereas no significant path
was found from power distance to
either empowerment or innovation
capability on the firm-level analysis.
Decline in the significance of power dis-
tance on the firm level seems to be
logical. Power distance is considering to
what extent employees accept the hier-
archical structure and the involvement
in decision-making processes. Even
though whether the individuals feel
comfortable in interactions across hier-
archical levels is an important issue on
the individual level, it may not have the
same significance on the firm-level per-
spective. Thus, collectivism seems so
important on the firm level, whereas
power distance seems noteworthy on
the individual level.
Prescriptive Implications for
Practitioners
This paper contributes to the litera-
ture in terms of human resource man-
agement and innovation management,
and offers several insights for chief
executive officers (CEOs) and senior
management, as well as human resource
managers. The results may assist manag-
ers to make better decisions in opting
for an appropriate management scheme
in order to achieve better innovation
performance. Taking into consideration
that innovation is essential in converting
ideas into something profitable, manag-
ers should encourage new ideas to
channel the creative ability of employees
into innovations. Therefore, organiza-
tions need to facilitate innovation by cre-
ating and maintaining a cultural
environment that supports idea genera-
tion and creativity. Results of this study
reveal that, to achieve high innovation
capability, organizations first need to
develop the behavioral and cultural
context, and practices for shaping an
innovative culture.
348 JOURNAL OF SMALL BUSINESS MANAGEMENT
This research also indicates that SMEs
that are involved in activities that create
perceptions of empowerment develop a
stronger ability to increase innovative-
ness. Claver et al. (1998, p. 66) provide
the impetus that motivates and empow-
ers individuals in the organizations to
innovate, suggesting that “. . . culture
must stimulate the process of generating
new ideas and applying them either
internally or to the market, with the ulti-
mate purpose of changing the markets,
adapting the firm to their discontinuities
and thus obtaining competitive benefits.”
So, managers should focus on how to
create an empowering work environ-
ment. For instance, Blanchard, Carlos,
and Randolph 1999 have provided a
clear and practical approach to creating
empowerment. They define three inter-
related keys that together can create
structural empowerment in organiza-
tions: (1) share accurate information
widely, (2) create autonomy via bound-
aries, and (3) replace hierarchical think-
ing with self-managed teams.
By testing the research model in two
samples separately on both the indi-
vidual and firm level, this study provides
a comprehensive framework of the
relationship between organizational
practices and innovation capability.
Comparing the relationships between the
two samples indicates that managers
have to take into consideration their
organizations’ size to evaluate effects on
innovation capability. Power distance,
for instance, may influence directly in
smaller organizations, whereas empow-
erment mediates the relationship
between power distance and innovation
capability in medium-sized firms. This
finding implies that the ability of an orga-
nization to recognize the value of infor-
mation and knowledge exchanged by
managers and employees is critical in
determining innovative output. At the
strategic level, top management should
appreciate the cultural profile of com-
panies, specifically regarding power
distance, as a key part of their organiza-
tional innovation infrastructure. At the
operational level, organizations need to
provide their employees with adequate
means to communicate and share the
information. From this point of view,
information sharing should be stimulated
because it is one of the most important
tools of creativity.
Although the results of this study are
context specific, there are some theoreti-
cal grounds to assume that businesses in
other cultures may experience similar
dynamics. First, cultural components of
Hofstede’s (1980) framework, which
have been used extensively in different
studies (Waarts and van Everdingen
2005; House et al. 2002; Sivakumar and
Nakata 2001; Sigler and Pearson 2000),
were used in this study, and that cultural
framework does not suggest a unique
cultural environment specific to Turkey
or Turkish SMEs. Second, the participa-
tive managerial practices, such as
empowerment, are not certain human
resource management practices applied
only in Turkey or Turkish SMEs. Third,
the results of this study somewhat
overlap with previous research findings
(Gudmunson, Tower, and Hartman 2003;
Sagie and Aycan 2003; Randolph and
Sashkin 2002; Ogbonna and Harris
2000). Thus, it can be concluded that the
findings of this study are not country
bound, and other SMEs, which have alike
cultural characteristics and managerial
practices, might experience similar
dynamics.
In conclusion, the findings of this
study provide information about patterns
in the innovation capability of SMEs by
considering the combined effects of
organizational culture and perceptions of
empowerment. First, it presents data
from 18 sectors encompassing over 100
organizations in Turkey. This fills an
important gap in this field, which, until
now, has been dominated by studies
based on data from U.S. companies. The
second contribution of the current study
ÇAKAR AND ERTÜRK
is its focus on combined effects of orga-
nizational culture and of employee
empowerment on innovation capability.
Third, this study aims to compare SMEs
in terms of all possible relationships
among variables. To achieve this aim,
the samples of small and medium-sized
firms were considered as two different
samples and statistically analyzed sepa-
rately rather than including firm size as a
moderator.
Limitations and Future Directions
The findings and the contribution of
the current investigation must be evalu-
ated, taking into account the potential
limitations of the research design. First,
the results of this study are limited and
constrained by the measures adopted to
gauge organizational culture, empower-
ment perceptions, and, specifically,
innovation capability. The measures
used are accepted as reliable and valid,
and their selection is defendable, but
additional insights into association may
be gained by adopting measures of
culture and empowerment that reflect
different perspectives. As noted by
Cronbach (1990) in his discussion of
the “bandwidth” versus “fidelity”
problem, there is often difficulty in
measuring broad constructs with great
reliability. Clearly, organizational inno-
vation capability is a broad construct,
and good measures must tap that
breadth with items that represent the
entire range of content. We believe that
the scales used in this study may
provide a good starting point for the
measurement of innovation capability.
In future development of these scales,
perhaps both desirability bias and con-
struct breadth issues can be addressed
by expanding the breadth of the con-
struct and the content specifications of
the items.
Second, despite the encouraging
support for the construct validity of
the organizational culture measures, the
relatively high correlation between the
349
individualism/collectivism and uncer-
tainty avoidance scales leads us to
speculate that the items may have
included a positivity or desirability bias.
This possibility can be explored in
future research. However, as noted by
Kristof (2000), it is perhaps even more
important to demonstrate that highly
correlated measures of conceptually
unique phenomena have distinctive
empirical relationships as predicted by
theory. She argued that constructs rep-
resented by highly correlated measures
should be viewed as conceptually dis-
tinct and important because of their
unique relationships with other con-
structs. Indeed, the results of the corre-
lation analysis and multi-collinearity
tests suggested that the two organiza-
tional culture scales had distinct rela-
tions with other measures in the study
as predicted by theory and, thus,
should be considered sufficiently
independent.
Third, attention should be paid to
expanding and refining measurement of
the dependent variable. Though the two
items used (R&D expenditures and firms’
new product development capacity) to
tap the innovation capability have prece-
dents in the literature (e.g., Denison
2000), they seem somewhat short of fully
operationalizing the innovation capabil-
ity construct.
Other concerns relate to the limita-
tions of the data itself. First, the data
were cross-sectional, making it impos-
sible to imply causality. All of the vari-
ables were measured at the same time
and from the same person, so concern
over the effects of common method vari-
ance was warranted. To minimize this
potential problem, the scales in the
actual survey were ordered so that the
dependent variable did not precede all
the independent ones (Podsakoff and
Organ 1986). Longitudinal designs in
which both predictor and criterion vari-
ables are measured over time might be
particularly useful extensions of the
350 JOURNAL OF SMALL BUSINESS MANAGEMENT
current study. Also, the data are limited
because of the fact that they were col-
lected in a single country. Moreover,
testing hypotheses across two levels of
analysis is beneficial to obtain greater
statistical accuracy (Rousseau 1985).
Thus, this study separately investigated
both individual and firm-level relation-
ships among variables concerning the
proposed relationships; however, com-
bining two levels of analysis in a single
multilevel model may also reveal inter-
esting results as well.
Our sample consists of multiple
respondents including top managers.
Top managers comprise of senior execu-
tives, who serve on the board, are
actively involved in developing and
implementing the strategy of that
company, and are responsible for plan-
ning, directing, and monitoring the
work of the employees. Yet none of
them was the employer or the owner of
the SMEs. As acknowledging the possi-
bility that top managers might have
different views on the culture, empow-
erment, and innovativeness relation-
ships than employees, it should be
noted that the top managers comprises
only four percent of our sample (only
33 of the 743 employees constituting
our sample were top managers), and a
considerable effect of their different per-
ceptions is not very likely in this study.
Furthermore, we also conducted appro-
priate pair-wise t-tests and ANOVA tests,
and they do not indicate any significant
difference between the top managers
and the other employees.
The findings, implications, and con-
clusions of this study are bounded by the
context of the research, but potentially
fruitful research could involve the repli-
cation of this study in a number of dif-
ferent contexts (including in specific
industries or different countries). We
believe that future research assessing
similar data from multiple sectors, and
perhaps specifically from multinational
enterprises, will provide an extremely
informative validation for our results.
Further in the future, a cross-cultural test
of our model would also increase our
understanding of how the combination
of cultural and managerial factors affects
innovation capability of SMEs. Addition-
ally, investigating other firm-specific
effects and managerial implications, such
as justice perceptions, trust, and
employee commitment, on innovation
capability may guide academicians and
practitioners to better understand the
determinants of innovativeness.
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Appendix A.
Scale Items
Scales and Definition/Items
References

Empowerment Definition: Individuals have the authority, initiative, and ability

to manage their own work. Individuals can also reach the
information they need. This creates a sense of ownership and
responsibility toward the organization.
Denison (2000) (1) The authority to make a decision is delegated to the
person who is responsible to perform the task.
(2) Decisions are usually made at the level where the best
information is available.
(3) Information is widely shared so that everyone can get the
information he or she needs when it is needed.
(4) Everyone believes that he or she can have a positive
impact.
(5) Every employee in our organization attends both short and
long-term planning processes.
Power Distance Definition: The extent to which people accept unequal power
distribution in an organization. In a high power distance
organization, employees believe in strict authority and
hierarchy, and have low egalitarianism. Less powerful
employees of such organizations tend to accept this unequal
power distribution.
Sigler and (1) People at lower levels in organizations have a
Pearson responsibility to make important decisions for people
(2000) around them.
Robbins and (2) People at lower levels in the organization should not have
Mukerji power in the organization.
(1994) (3) It is often necessary for a supervisor to emphasize
authority and power when dealing with subordinates.

356 JOURNAL OF SMALL BUSINESS MANAGEMENT

Appendix A.
Continued
Scales and Definition/Items
References

(4) Managers should be careful not to ask the opinions of

subordinates too frequently.
(5) A manager should avoid socializing with his/her
subordinates at the job.
(6) Subordinates should not disagree with their manager’s
decisions.
(7) Managers should not delegate difficult and important tasks
to subordinates.
(8) My supervisor makes decisions without asking to lower
level employees.
Collectivism Definition: The extent to which employees prioritize or weigh
their individuality versus their willingness to submit to the
goals of the work group or the organization. In collectivistic
organizations, employees find comfort and energy in the
group setting, whereas in individualistic organizations,
employees want to be able to stand out as individuals and not
be held back by the group.
Dorfman and (1) Group welfare is more important than individual rewards.
Howell (2) Group success is more important than individual success.
(1988) (3) Individuals may be expected to give up their goals in
Erez and Earley order to benefit coworker success.
(1987) (4) Working with a group is better than working alone.
Chen, Meindl, (5) People should pay absolutely no attention to coworker
and Hui views when deciding what kind of works to do. (R)
(1998) (6) Everyone should be held jointly responsible for each
Yilmaz, Alpkan, other’s performance.
and Ergun (7) Collective decisions are more relevant than decisions made
(2005) by each of us.
Assertiveness Definition: The extent to which employees feel that they
Focus should be results focused and insensitive to emotions. In
organizations of high assertiveness focus, employees tend to
be results oriented and insensitive to others, whereas in
organizations of low assertiveness focus, employees desire
positive relationships at work and place a higher value on
personal needs than on work needs.
Dorfman and (1) Meetings are usually run more effectively when they are
Howell chaired by a man.
(1988) (2) Having a professional career is more important for men
than it is for women.
(3) Women do not value recognition and promotion in their
work as much as men do.

ÇAKAR AND ERTÜRK 357

Appendix A.
Continued
Scales and Definition/Items
References

(4) Women value working in friendly atmosphere more than

men do.
(5) Men usually solve problems with logical analysis; women
usually solve problems with intuition.
(6) Solving organizational problems usually requires the active
forcible approach, which is typical of men.
(7) It is preferable to have a man in high-level position rather
than a woman.
(8) There are some jobs in which a man can always do better
than a woman.
Uncertainty Definition: The extent to which an employee willingly
Avoidance embraces or avoids the unknown. An organizational culture
with high uncertainty avoidance values predictability,
structure, and order. A culture with low uncertainty avoidance
values risk taking, ambiguity, and limited structure.
Dorfman and (1) It is important to have job requirements and instructions
Howell spelled out in detail so that employees always know what
(1988) they are expected to do.
(2) Managers expect employees to closely follow instructions
and procedures.
(3) Rules and procedures define what are expected from
employees.
(4) Standard operating procedures are helpful to employees
on the job.
(5) Instructions for operations are important to employees on
the job.
(6) In our organization, we have a mechanism that closely
follows what our competitors do.
(7) In our organization, there is a unit that evaluates the
suggestions and complaints of our customers.
(8) Requiring standardized work procedures is more important
than providing opportunities to be innovative.
(9) In our organization, we have a mechanism that analyses
the changes related to our work.
Innovation Definition: Innovation is generally defined not only as the
Capability conceptualization of a new product or service, but also as the
successful bringing of the new product or service to the
market. Accordingly, the organization’s innovation capability is
its ability to mobilize the knowledge, possessed by its
employees, and combine it to create new knowledge, resulting
in product and/or process innovation.

358 JOURNAL OF SMALL BUSINESS MANAGEMENT

Appendix A.
Continued
Scales and Definition/Items
References

Denison (2000) What is the relative position of your organization’s . . . ?

(1) New product development capability compared with
competitors.
(2) Research and development (R&D) expenditures compared
with competitors.
1—Much worse than competition
2—Worse than competitors
3—At the same level
4—Better than the competition
5—Much better than the competition

ÇAKAR AND ERTÜRK 359

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