Organizational structure, decision-making procedures, and the adoption of innovations

This paper tries to explain an anomalous finding in an earlier paper on a survey study of the adoption of process innovations in the domestic footwear industry. Our hypotheses that complexity would be positively related, and centralization and formalization negatively related, to the number of innovations adopted were confirmed by a partial correlation analysis but not by a zero order correlation analysis. In this paper we first show that complexity was acting as a suppressor variable, preventing the hypothesized relationships between formalization and adoption and centralization and adoption from appearing in the zero order analysis. We then ask why complexity has the power to override the effects of centralization and formalization. Case studies of firms' innovation decision-making processes indicate several characteristics of decisions that reduce the hypothesized negative effects of high levels of centralization and formalization upon adoption. The case study results also indicate that there would be an interaction between firm structure and innovation characteristics: high levels of centralization and formalization would reduce the adoption of revolutionary innovations but not of evolutionary innovations. This inference from the case study data is tested and confirmed with data from the survey.