Organizational Innovation and Organizational Change

Three ideas—a complex division of labor, an organic structure, and a highrisk strategy—provoke consistent findings relative to organizational innovation. Of these three ideas, the complexity of the division of labor is most important because it taps the organizational learning, problem-solving, and creativity capacities of the organization. The importance of a complex division of labor has been underappreciated because of the various ways in which it has been measured, which in turn reflect the macroinstitutional arrangements of the educational system within a society. These ideas can be extended to the study of interorganizational relationships and the theories of organizational change. Integrating these theories would provide a general organizational theory of evolution within the context of knowledge societies. ORGANIZATIONAL INNOVATION AND CHANGE Although many lament the absence of cumulative findings in sociology, the study of organizational innovation is one instance where consistent findings have accumulated across more than thirty years of research. This was demonstrated in two recent reviews (Damanpour 1991, Zammuto & O’Connor 1992) published in the management literature. This present review has as one of its objectives to acquaint sociologists with the generalizations that have emerged and, as another objective, to extend beyond these previous reviews in three distinctive ways: (a) by emphasizing the importance of the complexity of the division of labor; (b) by suggesting needed arenas of new research; and (c) by integrating organizational innovation with the more general topic of organizational change. This will broaden systemically the solid body of research already accumulated. Innovation research, although previously not central to the concerns of many sociologists, now offers an opportunity to address a large number of important practical and theoretical issues. Here are a few examples. Practically, since a country’s economic development depends largely on the continued launching of new products, governments have become concerned about innovation. Indeed, the new products and new services provide new employment opportunities and positive balances of trade, thus protecting the nation’s standard of living. But innovation in products, services, technologies, and administrative practices is also relevant to other institutional sectors besides the economy; the study of organizational innovation, for instance, articulates with the study of significant breakthroughs in science, the development of superior military equipment, the creation of interdisciplinary programs in higher education (Blau 1973), the reform of welfare, etc. In other words, for anyone interested in some of the most basic problems of society, the subject of organizational innovation is relevant. Theoretically, research on organizational innovation opens new perspectives on a number of interesting issues that have surfaced recently, including the issues of societal evolution and institutional change, the dynamics of knowledge societies (Bell 1973, Hage & Powers 1992), and the integration of macro and micro levels of analysis. Beyond sociology, organizational innovation can make important contributions to several important arenas of new research in economics. The most obvious one is research on national systems of innovation (Lundvall 1992, Nelson 1993), but it is equally relevant to endogenous theories of economic growth (Romer 1986, 1990, Solow 1992) more generally. The first section of this review examines the general pattern of findings and emphasizes the importance of three critical variables: (a) the organic structure, (b ) the organizational strategy; and (c) the complexity of the division of labor. In this section, we discuss the definition of innovation. The second section focuses on the new areas of potential research on organizational innovation. Here the emphasis is put on considering inputs and feedbacks as well as extending innovation studies to interorganizational relationships and the institutional level of analysis. Throughout this discussion, continued reference is made to linkages with several topics in the economics literature. The third section then shifts to the relationship between organizational innovation and the more general literature on organizational change. Four distinctive perspectives of change are considered and integrated. 598 HAGE