Is organizational innovation always a good thing?

Abstract

Is organizational innovation always a good thing? When is innovation negative? What are the damaging effects of innovation? In this article, it is argued that innovation has negative impacts on organizational performance when the newly introduced knowledge is not compatible with an organization’s prior knowledge. In this instance, an organization may experience knowledge loss or organizational dysfunctions, such as avoidance, resistance, struggle, alteration, and conversion processes. To avoid the negative impacts of innovation, we suggest that organizations should first recognize the incompatibility between the new knowledge and prior knowledge and then reformulate the newly introduced knowledge. Implications for theory and research are offered as well as suggestions for practice.

Keywords

Absorptive capacity innovation organizational forgetting organizational learning

Introduction

Research has long investigated the role of innovation at the individual, organizational, and societal levels (Christensen, 2002; Hargrave and Van de Ven, 2006; Von Hippel, 1988). At the organizational level, innovation has been linked to positive organizational changes (Damanpour, 1991) that lead to increased competitiveness, productivity, efficiency, performance, and organizational survival (Söderquist and Godener, 2004). Research has found that these positive organizational changes are often related to technology (Henderson and Clark, 1990), processes (Birkinshaw et al., 2008), learning (Knoppen et al., 2011), and services and strategy (Hamel, 1998).

From a knowledge-based perspective, “innovation is, in essence, new knowledge” (Quintane et al., 2011: 938). The capacity of an organization to recognize the value of new external knowledge, assimilate it, and exploit it for commercial ends has been addressed in studies of absorptive capacity (Cohen and Levinthal, 1989, 1990), in which absorptive capacity depends on “the knowledge source and prior knowledge, … is conditioned on the appropriability regimes, and … influences the innovative performance of the firm” (Todorova and Durisin, 2007: 774). Knowledge source, prior knowledge, and appropriability regimes have thus been addressed as critical determinants in the assimilation and exploitation of new external knowledge, to avoid knowledge loss (Martin de Holan and Phillips, 2004), to promote organizational learning (Easterby-Smith et al., 2008), and to enhance flexibility, innovation, and innovative performance. However, innovation is at times introduced because of political decisions or vested interests (Martin de Holan and Phillips, 2004), violations, an investment that cannot be converted, or decisions that ultimately are suboptimal (Zhao and Olivera, 2006). Often, after the introduction of innovation, organizations experience a diminished competitive advantage, increased costs, and a lowered level of organizational performance. Hence, is innovation in organizations always a good thing?

When is innovation negative? What are the damaging effects of innovation on organizational performance? Research has long highlighted the positive aspects of innovation but has not sufficiently investigated the potential negative impacts of innovation on organizational performance, only partially discussing the higher risks connected to innovation projects. For instance, the ambivalent character of innovation has been addressed as a process of creative destruction (Galunic and Rodan, 1998; Schumpeter, 1934, 1939) and sociotechnical formation destructive dysfunctions (Marx, 1935; see also Liker et al., 1999). More recently, research has pointed out the increased failure rates (Boulding et al., 1997) of innovation projects, addressing coordination mechanisms, lack of time, adverse culture, or lack of support from leadership as the major risks when introducing innovation (Adner, 2006; Galia and Legros, 2004; Hoskisson et al., 2002; Swan et al., 2002).

However, research has not sufficiently explained the potential negative impacts of innovation on organizational performance from a knowledge-based perspective where innovation is conceptualized as new knowledge (Quintane et al., 2011; see also Peters et al., 2011), and is intrinsically related to organizational knowledge and learning dynamics (Williamson, 1999), nor has it explained the interactive effects of knowledge and innovation (Nissen, 2002), even though knowledge has been addressed as the core of the innovation process (Galunic and Rodan, 1998) and has been directly related to organizational performance (Mors, 2010). Researchers have only begun exploring innovation from a knowledge-based perspective, and “further research is required to understand how this new knowledge relates to an innovation outcome” (Quintane et al., 2011: 936) because “theories explaining how innovating organizations evaluate knowledge are sparse” (Peters et al., 2011: 538).

This article explores the potentially negative effects of innovation on organizational performance from a knowledge-based perspective. To problematize our research problem, we followed the recommendations of Alvesson and Sandberg (2011), identifying and developing within the innovation domain literature alternative assumptions that could be considered as novel and provocative (Davis, 1971), and could challenge the widely accepted innovation–higher performance link field assumption (Alvesson and Sandberg, 2011). We propose that when innovation, conceptualized from a knowledge-based perspective as new knowledge and seen as something that can be managed (see, for example, Dierkes et al., 2003; Easterby-Smith and Lyles, 2003; Spender, 1992, 1994; Spender and Marr, 2005), is not compatible with prior knowledge, organizations may experience knowledge loss or organizational dysfunctions, specifically avoidance, resistance, struggle, alteration, and conversion processes.

Supported by a hermeneutical in-depth reading (Crotty, 1998), we frame our discussion of prior knowledge within the organizational learning, absorptive capacity, and organizational forgetting literature, drawing “connections between works and investigative streams not typically cited together … [which] suggests the existence of underdeveloped research areas” (Locke and Golden-Biddle, 1997: 1030 as cited in Alvesson and Sandberg, 2011: 249). Our underlying assumption is that organizational knowledge “can be managed, stored, traded and applied” (Spender, 2008: 159), and that inter- (Brown and Duguid, 2002) and intra-organizational learning processes such as exploration, assimilation, and exploitation “are highly interrelated in creating absorptive capacity which in turn drives innovation” (Knoppen et al., 2011: 422; see also Lichtenthaler, 2009).

At the intra-organizational level of analysis, we follow a knowledge transfer perspective of knowledge and learning, where learning has been theorized as a process of acquiring knowledge from one setting and using it in another. Many studies have investigated the movement of knowledge and its related learning processes, focusing on impediments to this movement (see, for example, Argote, 1999; Szulanski, 1996), network relational characteristics (Hansen, 1999; Levin and Cross, 2004), role of managerial involvement (Jansen et al., 2005; Van den Bosch and Van Wijk, 2001), and the structure of the network (Allen, 1977; Rogers, 1995). Most recently, researchers have addressed the movement and recombination of existing knowledge to create new forms of organizational knowledge (Argote, 1999; March and Simon, 1958; Nelson and Winter, 1982). It has been found that this is “particularly attractive when the needed knowledge was not inherited or cannot be readily added onto the organization’s knowledge base” (Katila and Chen, 2008: 593), clearly pointing out the role of prior and new knowledge in the knowledge assimilation process (or failure to do so, thus leading to forgetting) at the intra-organizational level of analysis. Therefore, studying how new and prior organizational knowledge, intra-organizational learning and forgetting processes, and absorptive capacity impact innovation is relevant, especially in dynamic environments (Hage, 1980; Schweitzer et al., 2011; Thomke, 2003) where the introduction of innovation varies qualitatively and quantitatively, and both knowledge exploration (March, 1991) and innovation speed (Kessler and Chakrabarti, 1996) become crucial for an organization’s survival.

This article is structured as follows: We first explore the literature on innovation and existing or prior knowledge, defining these concepts for this article. We then move to the description of the negative impacts of innovation when the newly introduced knowledge is not compatible with existing or prior knowledge. We especially focus on the discussion of damaging effects such as reduced absorption and reduced creation of new knowledge, knowledge loss, and organizational dysfunctions, and define propositions for future explorations. Drawing on related theories (Daft, 1978; Van de Ven, 1986), we frame ideas on reformulating innovation to have positive impacts on organizational performance, including minor adaptations, creative reformulation, and changes in the methods used to introduce new knowledge. Finally, we conclude with implications for theory and practice and suggestions for future research.

Innovation, knowledge, and learning

Innovation has long been discussed in the literature, in terms of innovating and innovativeness (Damanpour, 1991; Normann, 1971; Van de Ven and Rogers, 1988), incremental and radical innovation (Dewar and Dutton, 1986), and diffusion of innovation and adoption of innovation (Kimberly, 1981). Innovation has also been analyzed at different levels (Baldridge and Burnham, 1975). In particular, research has contrasted internal and relational innovation (Knoppen et al., 2011) and open and closed innovation (Almirall and Casadesus-Masanell, 2010) and has investigated organizational variables affecting closed innovation at both the individual and organizational levels.

At the individual level, the most addressed determinants of innovation have been connected to individual behavior, knowledge, and intra-organizational learning. In particular, three major groups of determinants have been addressed in the literature. The first is the degree of specialization and functional differentiation (Damanpour, 1991) to ensure a broader knowledge base (Kimberly and Evanisko, 1981), technical knowledge (Dewar and Dutton, 1986), and diffusion of new ideas and learning (Swan et al., 2010). The second group of determinants relates to commitment to innovation and professionalism (Damanpour, 1991) to increase self-confidence and positive attitudes toward new ideas. The final group relates to managerial style, including managers’ positive attitude and support and managers’ tenure, to ensure long-term innovation programs and effective knowledge acquisition and implementation processes (Kimberly and Evanisko, 1981; on managerial behavior, see also Sadler-Smith et al., 2003).

At the organizational level, the most addressed determinants of innovation have been related to the organizational structure. Examples include chain of command, in which dispersion of authority is more likely to create innovative environments (Chesbrough, 2003; Thompson, 1965), and coordination mechanisms (Jansen et al., 2005). Another organizational-level determinant consists of internal and external communication channels to effectively acquire external knowledge (Brown and Duguid, 2002; Lane et al., 2001; Laursen and Salter, 2006); internally diffuse it (Argote, 1999) via syntactic, semantic, or pragmatic approaches (Carlile, 2002); and successfully retain it within the organization (Argote et al., 2003; Cockburn and Henderson, 1998; Ross, 1974). Additionally, research has pointed out the role of intra-organizational learning processes, such as exploration, assimilation, and exploitation, and has pointed out how these processes interrelate and create absorptive capacity which in turn promotes innovation (Gebauer et al., 2012; Knoppen et al., 2011). Research has also proposed different moderators in the relationship between organizational variables and innovation, including type of organization, type of innovation, stage of adoption, and scope of innovation (Damanpour, 1991).

As a result, innovation determinants can be categorized into four distinct groups. The first group is content, including the organizational knowledge base and prior knowledge in terms of technical and general knowledge. The second is employees’ involvement, including employees’ attitudes and predispositions toward innovation or proactive behaviors (Jones, 2006). The last two groups are leadership, including managerial involvement in the promotion of innovation, and organizational structures, including chain of command, coordination and communication mechanisms, organizational boundaries (Orlikowski, 2002), and intra-organizational learning (Knoppen et al., 2011).

From this preliminary literature review, it is clear that both human capital—in terms of a repository of both technical and general knowledge, passive and proactive behavior, and leadership style—and organizational structures—including hierarchical levels, internal and external mechanisms of coordination and communication, and intra-organizational learning processes—influence the absorption of innovation. What is already known by an organization that is directly related to both the knowledge repositories and the way this knowledge is learned and made available throughout the organization can impact its future performance and success.

In this article, we primarily focus on the content of knowledge and on leadership to better understand how prior knowledge, learning, and managerial involvement impact innovation. We secondarily consider employees’ involvement and organizational structures as determinants of innovation. We define organizational innovation as “duplicable knowledge considered new in the context it is introduced to and demonstrated useful in practice” (Quintane et al., 2011: 939). This definition sets the characteristics of innovation in terms of duplicability, new in the context it is introduced to, and demonstrated usefulness and includes new knowledge that can be externally acquired and internally learned; the definition excludes the concepts of diffusion of innovation and management innovation (Birkinshaw et al., 2008).

Prior knowledge

While reviewing the entire literature on organizational knowledge is beyond the scope of this article, at least three literature streams can be identified in the discussion of prior knowledge that forms an organization’s knowledge base: those of organizational learning, absorptive capacity, and organizational forgetting. This literature focuses on the role of prior knowledge during the learning (or failure to learn) process when innovation is externally acquired by an organization. Additionally, research on managerial involvement within these literature streams is also reviewed to understand how and to what extent managers contribute to the effective introduction and implementation of organizational innovation, promoting organizational learning, and mitigating negative impacts of incompatible innovation. As pointed out by Spender (2008), “If our knowledge theorizing is to become relevant to managers, we must understand more of the processes of imagining, learning, and forgetting” (p. 165).

Organizational learning

In the organizational learning literature (Easterby-Smith, 1997), prior knowledge has been considered a crucial variable since it tends “to enhance subsequent learning because memory is associative” (Easterby-Smith et al., 2008: 484). This relationship between prior knowledge and knowledge acquisition has also been extended to subsequent processes of knowledge retrieval and use (Gammelgaard and Ritter, 2005; Mariano and Casey, 2007).

Research has investigated the relationship between knowledge acquisition and prior knowledge at both the individual and organizational level. At the individual level, studies have found that organization, differentiation, and linkages among knowledge categories (Bower and Hilgard, 1981), but also contextual knowledge and intensity of effort (Hansen, 1999; Lindsay and Norman, 1977), affect the learning of new knowledge.

At the organizational level, research has found that intra-organizational learning develops and shapes the organization knowledge base (Shrivastava, 1983), learning is cumulative because of its associative nature (Easterby-Smith et al., 2008), and that several factors impact the capacity of the organization to acquire, retain, and use new knowledge. These factors involve the tension between exploitation and exploration processes (March, 1991), the relational context (Knoppen et al., 2011), and how an organization makes use of new knowledge within its units and includes internal and external communication channels and the variety of expertise and distribution of this expertise within the organization (Cohen and Levinthal, 1990). This organizational expertise, or background knowledge, also impacts knowledge flows (Argote, 1999; Hansen, 1999) and changes in the knowledge base as a function of experience (Argote, 2013). As a result, prior knowledge affects performance so that performance is better when learning is related to what is already known (Cohen and Levinthal, 1990) because organizations change based on their experiences (Argote, 2013; Fiol and Lyles, 1985; Levitt and March, 1988) or as prior knowledge is refined (Argote, 1999). This capacity of the organization to absorb new knowledge and contribute to intra-organizational learning processes is also explored in relation to task performance experience (Argote and Miron-Spektor, 2011), combinative capabilities (Gebauer et al., 2012), and innovation (Gebauer et al., 2012; Peters et al., 2011), where learning is found to facilitate absorptive capacity and which in turn enables innovative outcomes (Gebauer et al., 2012; Knoppen et al., 2011; Lichtenthaler, 2009).

Therefore, we propose the following (Reynolds, 1971):

Proposition 1. Lower compatibility levels between new and prior knowledge will more likely lead to lower intra-organizational learning of new knowledge.

Proposition 2. Intra-organizational learning of new knowledge will facilitate absorptive capacity which in turn will create more opportunities for innovative outcomes.

Absorptive capacity

The concept of absorptive capacity was first introduced by Cohen and Levinthal (1989, 1990). It was further evaluated by Zahra and George (2002) and Todorova and Durisin (2007), and then was carefully reviewed in its applications (Lane et al., 2006; Volberda et al., 2010). Absorptive capacity has also been discussed in the theoretical literature of dynamic capabilities, organizational learning, and knowledge management (Easterby-Smith et al., 2008; Jansen et al., 2005; March, 1991; Teece et al., 1997).

Absorptive capacity is “the firm’s ability to identify, assimilate and exploit knowledge from the environment” (Cohen and Levinthal, 1989: 569–570). This ability has been strictly connected to prior knowledge, which helps to recognize, assimilate, learn, and exploit new knowledge. Prior knowledge has been considered a set of basic skills and shared language, but has also been related to scientific and technological development knowledge (Cohen and Levinthal, 1990). “Without prior knowledge, organizations are not able to evaluate the new information and, thus, fail to absorb it” (Todorova and Durisin, 2007: 777). Research has found that organizations that invest in direct or indirect absorptive capacity are better able to develop their own prior knowledge and, as a result, learn more (Knoppen et al., 2011) and implement innovation easier (Rosenberg, 1982). An example of a direct investment in absorptive capacity is internal personnel training for the acquisition and learning of new knowledge, skills, and competencies, while an example of an indirect investment in absorptive capacity is interfirm knowledge exchange. In both cases, an organization is investing in its own internal knowledge, which becomes the basis for associative learning processes (Easterby-Smith et al., 2008) and for absorbing potential new knowledge. Research has also found that individuals in an organization will more easily absorb new knowledge when it is related to their current knowledge, such as background, expertise, or training (Reagans and McEvily, 2003) and that the absorptive capacity of an organization is largely dependent on intra-organizational learning processes (Knoppen et al., 2011), the overlap between sender and receiver, and its organizational antecedents (Cohen and Levinthal, 1990; Lane and Lubatkin, 1998) such as coordination, systems, and socialization capabilities (Jansen et al., 2005). Additionally, research has found that the distribution of prior related knowledge throughout the entire organization is crucial for both internal learning processes (Crossan et al., 1999) and the development of the absorptive capacity of the entire organization (Lenox and King, 2004). It is clear that when an organization does not possess the related prior knowledge, it will face more difficulty in learning and making meaning of new knowledge, especially if this knowledge is not related to what the organization originally knows or is capable of doing at a certain time. As a consequence, an organization may experience lower absorption of new knowledge and may lose its competitive advantage because it is not able to keep high levels of innovation speed (Kessler and Chakrabarti, 1996), as also documented in the organizational learning (Gebauer et al., 2012; Knoppen et al., 2011) and forgetting literature (Martin de Holan and Phillips, 2004).

Therefore, we propose the following:

Proposition 3. Lower compatibility levels between new and prior knowledge will more likely lead to lower absorption of new knowledge.

Organizational forgetting

The organizational forgetting literature has also taken into consideration the concept of prior knowledge, which has been defined as “basic orientation” or “general cultural frame” (Martin de Holan and Phillips, 2004: 1610). Research has found that basic orientation enables coordination of internal activities to achieve organizational goals (Douglas, 1986) and make collective actions possible (Martin de Holan and Phillips, 2004). When the organization’s culture conflicts with new knowledge, more efforts are required to avoid organizational forgetting. As a consequence, an organization cannot easily retain new knowledge when it is less compatible with prior knowledge. It has also been found that the distinctiveness of prior knowledge can affect the loss or deterioration of newly introduced knowledge (Martin de Holan and Phillips, 2004). Several variables have been proposed to influence organizational forgetting and related learning failure processes, including accumulated knowledge and absorptive capacity but also power, politics, and vested interests (Lawrence et al., 2005; Marshall and Brady, 2001; Martin de Holan and Phillips, 2004). Accumulated knowledge and absorptive capacity have been especially seen as determinants of organizational forgetting at the level of new knowledge, a mode called knowledge dissipation (Martin de Holan and Phillips, 2004).

We also propose organizational dysfunctions as consequences of incompatible innovation, classifying them as avoidance, resistance, struggle, alteration, and conversion processes. Avoidance and resistance responses directly link to organizational knowledge dissipation and loss. The alteration process includes struggles in the implementation and partial implementation of new knowledge as it combines with prior knowledge but is applied in a fuzzy way, something similar to the concept of knowledge-based mistakes (Rizzo et al., 1987; Zhao and Olivera, 2006), which happen when individuals do not properly recognize a problem or situation and make erroneous associations among elements. Alteration processes can lead to errors and mistakes, inconsistencies in the implementation process, time loss and costs associated with redeveloped solutions, and costs associated with inaccuracies, stress, and conflicts.

The conversion process involves modifications to prior knowledge, which evolves in new forms due to the initial incompatibility and affects future innovation built from a knowledge that has not yet developed. In this instance, the new combined knowledge can block future learning processes, such as integration or institutionalization (Crossan et al., 1999), creating organizational inertia, or can prevent the correct implementation of future innovation. The management of organizational knowledge is thus obstructed by existing memory (Anand et al., 1998). Common examples of conversion processes include knowledge transformation and change of knowledge. In these instances, keeping old knowledge in place may be a better option to consider for achieving an organization’s success.

Mariano and Casey (2013) addressed the issue of alteration and conversion processes and called them distortion modes. According to their knowledge shaping model, distortion occurs when obsolete knowledge is not properly discarded before new knowledge can be introduced into the organization, and thus the overall implementation process cannot reach its full potential. For example, employees may be trapped in old schemas or may not recognize the benefits associated with the application of new practices. In their study, Mariano and Casey (2013) reported examples of employees who had to apply new procedures to deal with a problem; because of an insufficient understanding of these new procedures, they recycled old ideas or methods and combined them with the new practice (intended as new knowledge) to accomplish the task. From a managerial perspective, this situation is common when organizations try to discard bad practices but fail to do so because employees do not recognize the benefit associated with new knowledge, are not sufficiently aware of its potential, or experience some degree of resistance to change (Mariano and Casey, 2013). Martin de Holan and Phillips (2004) also addressed the issue of discarding bad practices and related it to vested interests, politics, and position power. To mitigate the disruptive effects of alteration and conversion processes, we propose organizations either increase employees’ awareness of the benefits associated with new knowledge or assess whether prior knowledge would more successfully contribute to effective knowledge implementation processes, decreasing organizational dysfunctions.

Therefore, we propose the following:

Proposition 4. Lower compatibility levels between new and prior knowledge will more likely lead to higher dissipation of new knowledge.

Proposition 5. Lower compatibility levels between new and prior knowledge will more likely lead to higher avoidance, resistance, struggle, alternation, and conversion processes of new knowledge.

Managerial involvement

Research has shown that managers have a strong effect on learning (Mariano and Casey, 2013), forgetting (Cegarra-Navarro et al., 2012; Martin de Holan and Phillips, 2004), and knowledge processes (Van den Bosch and Van Wijk, 2001), as they can help recognize the value of new knowledge, creating the meaning of it (Williams, 2001), even though there may be possible failures in doing so (Christensen and Bower, 1996). In particular, managers can exercise systemic or episodic power to identify and gather external knowledge. In addition, they can indirectly influence absorptive capacity through their cognition (Van den Bosch et al., 1999; on cognitive style, see also Sadler-Smith, 2004) and managerial capabilities such as coordination, systems, and socialization (Jansen et al., 2005). Managers can also modify the knowledge base of an organization (Adner and Helfat, 2003) and directly create internal systems that ensure the exploitation of new knowledge (Easterby-Smith et al., 2008) or the “learning by” an organization (Popper and Lipshitz, 2000).

Research has found that managers can exercise key roles such as gatekeepers, boundary spanners, and change agents (Jones, 2006) to facilitate absorptive capacity and organizational learning processes, to correct actions, to provide information to internal potential adopters of new knowledge, to enable an organization’s absorptive capacity (Lenox and King, 2004), and to reemphasize the need to follow new processes or procedures (Martin de Holan and Phillips, 2004). Organizational structures, reward systems, and human resources management practices and policies (Volberda et al., 2010) can influence the absorption of new knowledge and can help managers explain how employee turnover or key individuals’ expertise impacts the absorptive capacity of the organization and its internal knowledge loss processes.

Therefore, we propose the following:

Proposition 6. Lower managerial involvement will more likely lead to lower absorption and learning of new knowledge.

Proposition 7. Lower managerial involvement will more likely lead to higher dissipation, avoidance, resistance, struggle, alteration, and conversion processes of new knowledge.

Negative impacts of innovation: Summary

In summary, the organizational learning, absorptive capacity, and organizational forgetting literature suggests several common elements related to prior knowledge and managerial involvement which could help mitigate the negative impact of incompatible innovation:

Prior knowledge is key to the recognition of the value of new knowledge, especially if it is closely related to what it is meant to learn and absorb.

Prior knowledge is essential “during” the learning process.

Managers have key roles in the selection and management of appropriate external and internal knowledge, and in the facilitation of inter- and intra-organizational learning processes.

Supervision mechanisms reinforce the absorption and learning processes of new knowledge and reduce episodes of knowledge dissipation and organizational dysfunctions, that is, avoidance, resistance, struggle, alteration, and conversion processes.

Prior knowledge is thus a fundamental determinant of innovative performance and needs to be carefully analyzed when new knowledge is introduced into an organization.

From the previous review of the literature, it can be stated that both prior knowledge and managerial involvement are crucial determinants of organizational performance. Innovation that is incompatible with prior knowledge or is not supported by managers can easily dissipate. In particular, it is argued that both prior knowledge and managerial involvement are positively related to organizational learning and absorptive capacity processes, while they are negatively related to knowledge dissipation and organizational dysfunctions, such as avoidance, resistance, struggle, alteration, and conversion processes.

Reformulation of new knowledge to increase innovative performance

When innovation is not compatible with prior knowledge, an organization experiences a trade-off between organizational forgetting and organizational learning. Absorption and learning of new knowledge become difficult processes, and two major negative impacts emerge: knowledge loss, such as dissipation, and organizational dysfunctions, such as avoidance, resistance, struggle, alteration, and conversion processes.

To reduce the negative impacts of innovation, we propose organizations may reflect on their knowledge base to recognize the incompatibility between prior knowledge and new knowledge in terms of introduced innovation. Two opposite circumstances can be faced: employees can either show a negative attitude toward innovation, avoiding its implementation, or employees can show a positive attitude toward innovation but, because of the initial incompatibility between new knowledge and prior knowledge, struggle in its implementation or, conversely, alter it into a new form that may cause organizational damage. In the first case, the lack of proactive behavior and the negative attitudes and predispositions toward innovation are clear signs of incompatibility between prior knowledge and new knowledge. This incompatibility is especially evident in decreased self-confidence toward new knowledge or internal disruptions such as increased mistakes, inconsistencies, time loss, increased costs, inaccuracies (Zhao and Olivera, 2006), and dissatisfaction. In the second case, employees may try to implement innovation but, because of the initial incompatibility between prior knowledge and new knowledge, may experience psychological stress and internal conflicts. In both cases, managers or error reporting systems (Zhao and Olivera, 2006) may recognize the incompatibility between prior knowledge and new knowledge and move to the reformulation process.

Examples of knowledge dissipation or distortion processes are well documented in the literature. For instance, Martin de Holan and Phillips (2004) discussed the risks associated with knowledge dissipation when new knowledge is not sufficiently retained within the organization and easily disappears, causing time loss, errors, and costs associated with redeveloped solutions. In their study, they discussed the decreased levels of performance of hotel members when reinforcement mechanisms were not in place to ensure the right implementation of new practices. Similarly, the 3-year grounded theory study conducted by Mariano and Casey (2013) documented examples of alteration and conversion processes and related them to erroneous combinations of new and prior knowledge, which they found to be associated with both a lower level of understanding and a lower perceived value of new knowledge. In this instance, what they called a distortion mode could be highly risky because, if not addressed quickly and properly, it could regress into forms of knowledge dissipation.

After assessing the internal knowledge base and recognizing the incompatibility level between prior and new knowledge, the organization may reformulate innovation to adapt to existing knowledge. Reformulations can range from minor adaptations to creative reformulation (Easterby-Smith et al., 2008) or can relate to the methods used to introduce new knowledge into the organizational memory (Martin de Holan and Phillips, 2004), for example, using situational learning instead of fixed and predetermined rules to increase the level of understanding of newly introduced knowledge and its perceived value.

Minor adaptations can relate to single pieces of new knowledge that have to be reformulated, such as a new rule in the policies and procedures manual that clearly conflicts with prior knowledge because it is avoided or partially implemented. In this case, an organization can decide to reformulate or completely change this single piece of knowledge, depending on the initial reaction of employees and the extent of errors, mistakes, inconsistencies, time loss, costs of redeveloped solutions and inaccuracies, stress, and conflicts. For instance, organizations may find that what they intend to be an innovative information technology tool to share organizational knowledge may not be perceived as such by organizational members, who still prefer collective experience to share their tacit knowledge. In this case, overall knowledge sharing processes could increase in the organization if the introduced tool were replaced by other innovative means such as role playing, brown bag meetings, or after-work creative activities (Mariano and Casey, 2007).

Creative reformulation may be needed when the entire body of newly introduced knowledge conflicts with prior knowledge, such as technical or more advanced knowledge that does not fit with what the organization is capable of doing at a certain time. In this case, an organization may abandon or completely reformulate the innovation to ensure that the content that is introduced fits with prior organizational knowledge and can benefit both the individuals and the organization (see Table 1). For example, Mariano and Casey (2013) found that matching new knowledge with prior knowledge was crucial for the organization they studied, because if the newly introduced knowledge was too advanced compared to what the organization originally knew, the organization was not able to properly absorb it.

Table 1.

Recognition and reformulation of incompatible innovation.

Actions	Elements	Organizational outcomes
Recognition	Avoidance Resistance Struggle Alteration Conversion	Decreased absorption and learning Increased knowledge dissipation Decreased organizational performance
Reformulation	Minor adaptations Creative reformulations Changes in knowledge introduction methods	Increased absorption and learning Decreased knowledge dissipation Increased organizational performance

Additional changes can also be made to reduce barriers between knowledge sources and knowledge recipients through communication channel mechanisms and information filter practices (Henderson and Clark, 1990), such as using web-based information technology repositories instead of shared drives to spread organizational knowledge and make it available without restrictions related to access time or location.

Conclusion and implications for future research

In this article, we have used problematization as a research methodology (Alvesson and Sandberg, 2011) and discussed the negative impacts of innovation on organizational performance. We defined both innovation and prior knowledge, described their potential incompatibilities, and listed the negative impacts of innovation on organizational performance. We specifically focused on decreased absorption and learning of new knowledge, knowledge loss, and organizational dysfunctions, that is, avoidance, resistance, struggle, alteration, and conversion processes, offering suggestions on how to reformulate innovation to have positive impacts on organizational performance—through minor adaptations, creative reformulations, or changes in the knowledge introduction methods.

This article contributes to theory in several ways. First, it sheds light on the negative impacts of innovation, taking a problematization approach to the management of organizational knowledge, intra-organizational learning, and knowledge absorption processes. While previous research has extensively investigated the role of innovation in organizational success and competitive advantage, this article argues that innovation may have negative impacts on organizational survival if the innovation intended as new knowledge (Quintane et al., 2011; see also Peters et al., 2011) is not compatible with prior knowledge and creates negative effects such as knowledge loss and internal organizational dysfunctions, that is, avoidance, resistance, struggle, alteration, and conversion processes. Second, this article classifies the negative impacts of innovation and offers possible reformulation strategies, providing a comprehensive view of the phenomenon studied. Finally, this article connects theories of organizational learning, absorptive capacity, and organizational forgetting and frames them around the concepts of prior knowledge and managerial involvement, providing a new theoretical perspective that builds on novel assumptions (Alvesson and Sandberg, 2011).

In terms of contributions to practice, this article sheds light on the role of managers in the process of innovation and highlights the negative impact of innovation on organizational performance. Managers who want to enhance organizational learning and absorptive capacity, and contribute to organizational performance, should recognize incompatibilities between innovation and prior knowledge and should promote actions to reformulate new knowledge to be positively acquired by the members of an organization. These actions can range from minor adaptations to creative reformulation and to the methods used to introduce new knowledge into an organization.

Future research should empirically test the propositions outlined to verify the relationship between knowledge complementarities and organizational learning and absorption processes, and between managerial involvement and organizational performance. In addition, future research should investigate the longitudinal negative impacts of innovation. How does incompatible innovation impact organizational knowledge and learning over time? What are the conditions under which incompatible innovation causes organizational inertia? What are the conditions under which incompatible innovation causes organizational tension? How does incompatible innovation impact intra-organizational learning processes such as integration or institutionalization? (Crossan et al., 1999). Another area of investigation at the individual level relates to the impact of incompatible innovation on organizational members’ learning processes and performance. What types of conflict in the learning process can incompatible innovation create over time? What is the impact of incompatible innovation on individual knowledge absorption and intrinsic learning? Finally, future research should consider the impact of organizational structure on innovation to investigate the circumstances under which the rigidity of an organization’s structure can affect intra-organizational knowledge and learning processes which in turn will impact potential innovative outcomes.

We believe that studies of innovation should consider this new perspective on incompatible innovation to effectively understand how to improve intra-organizational knowledge absorption and learning and guarantee organizational survival.

Footnotes

Funding

This research received no specific grant from any funding agency in the public, commercial, or not-for-profit sectors.

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