Creativity and Firm-Level Performance: The Mediating Effects of Action Orientation

Abstract

Creativity was identified as the single most important attribute to future business success in a recent study that interviewed over 1,500 CEOs from 60 nations and 33 industries (IBM, 2010). Despite its popularity in industry, researchers have yet to find a conclusive empirical relationship showing that creativity impacts firm-level performance. A possible explanation is that while creativity may impact performance at many levels, it is the firm's ability to actually enact creativity that impacts firm-level performance. Over the past thirty years, researchers have significantly advanced the collective understanding and knowledge of creativity as a latent construct and its impact on organizations, yet have limited attempts in linking creativity and firm-level performance. Considering that the vast majority of creativity research is grounded in the organizational behavior domain, there is significant opportunity for researchers to examine creativity across multiple levels of analysis, including organization theory and strategic management. The primary focus of this study is to offer empirical validation of the mediating effects of action orientation on the creativity-performance relationship. Two possible rationalizations may exist regarding limited success in empirically assessing the link between creativity and performance. First, confusion exists between the concepts of creativity and innovation. Creativity has been defined as the production of original and functional ideas, while innovation has been defined as the employment of those ideas (c.f. Amabile, 1983, 1988). Innovation is the result of creativity (Amabile et al., 1996). However, researchers and managers use the concepts of creativity and innovation interchangeably. Although related, creativity and innovation are fundamentally and operationally different constructs. The creativity literature primarily operationalizes creativity as a psychological or latent construct (Amabile et al., 1996). In contrast, the innovation literature primarily operationalizes innovation using: (1) objective output measures such as new product/process introduction (Lyon and Ferrier, 2002), (2) awards and intellectual property such as patents (Griliches, 1990; Jaffe et al., 1998), and (3) objective input measures such as RD however, creativity may only have a modest impact on performance. Note that decades worth of research on innovation and intrapreneurship have discussed numerous benefits to firms that implement new innovations (c.f. Carrier, 1996; Goosen et al., 2002; Pinchot, 1985, 1987; Zahra, 1993, 1995). Using the same argument, this paper will investigate the possibility that the relationship between creativity and performance is mediated by the firm's ability to implement creative ideas. CREATIVITY Several significant studies have shaped the construct of creativity. Woodman et al. (1993) hypothesized creativity as a multilevel construct consisting of ten interrelated factors and directly linked individual creative performance to organizational creative performance. In this model, organizational creative performance was theoretically influenced by an array of characteristics including organizational culture, leadership, and organizational strategy. While previous studies only considered micro-level characteristics of creativity, examining creativity from a firm-level perspective, namely, examining creativity on firm-level performance, can holistically increase the understanding of creativity. A comprehensive review of the extant creativity literature yields several attempts to empirically validate factors from the Woodman et al. …