Comparing Innovation Capability of Small and Medium‐Sized Enterprises: Examining the Effects of Organizational Culture and Empowerment

Abstract

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 innovation 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 innovative work environment. Findings also reveal that managers should focus on participative managerial practices (e.g., empowerment) to promote innovation capability of SMEs.