Relationship between Organizational Culture, Innovation, and Productivity

Introduction 

The secret sauce for any successful organization or nation is finding a perfect amalgamation between culture, innovation, and productivity. In most cases, it is easy for one to talk about having an innovative culture that supports higher levels of productivity. However, it is hard for one to try comprehending the relationship between culture, innovation, and productivity and even coming up with the perfect formula to ensure the three elements are perfectly mixed.

Culture refers to a shared pattern of understandings, cognitive constructs, interactions, and behaviors that are learned by socialization. The refection of culture is enabled through a group’s heritage and history and how the ideas and creativity are expressed. Culture measures a society’s vitality, health, and people’s quality of life (Idang, 2015). Various economic elements and social structures have a mutual relationship with culture formed by continually informing each other. On the other hand, refers to the translation of an idea into a service or good that can create value for people. However, before the idea can qualify to be referred to as and innovation, it must satisfy a specific need and have a positive economic cost.

Moreover, productivity refers to the measure of the efficiency of a system, factory, machine, person, among others (Bernolak, 2009). Productivity is a vital element of competitiveness and economic growth. In relation to a nation, for it to have the ability to improving the citizens’ living standards, it must raise its output per employee in that; more goods must be produced within a certain number of hours. In this era of continued globalization brought about by technological advancement, there is increased competitiveness, and this has had a tremendous influence on the productivity and innovation abilities of organizations and nations. Because of this, politicians, business practitioners, and the public have continued to stress the importance of innovation towards the creation of competitive advantage and economic development (Brem et al., 2016; Naqshbandi, 2016; Fagerberg et al., 2010). A very vital example of a nation that is trying to set policies that support a culture supported by an innovative and productive society is The Chinese Republic.

Culture plays a crucial role in boosting innovation and productivity. Various studies have been able to recognize the importance and influence of culture on innovation and productivity more specifically related to organizational development and international management (Rohlfer & Zhang, 2016; Verspagen, 2016; Parveen et al., 2015). It has also been evidenced that nations with an ideographical cultural environment have a very strong foundation that supports higher levels of productivity and innovation.

Nonetheless, despite this numerous research on the role that culture plays towards boosting innovation and productivity, there are several limitations in the research. This results from the fact that most of the research has only based on organizations. There has been very little research into the relationship between culture, innovation, and productivity with regards to nations. To overcome this shortfall in research, this study shall use a systematic literature review and try to ascertain and fill the gaps using a case study of two nations; Germany and Japan. The main objectives of this research are to (1) to determine the meaning of culture, innovation, and productivity, (2) to identify the relationship between culture, innovation, and productivity. Tranfield et al. (2003) state that the study’s results will help towards the development of a reliable knowledge base through using knowledge from previous studies supported by case studies involving Germany and Japan.

Conceptual Boundaries 

Culture 

Anthropologists and sociologist have over the years tried to come up with single definition if the term culture though very few have come up with a single agreement. According to House et al. (2002), culture is defined as elements that define the values, ideologies, and beliefs that govern their way of living. Culture helps to distinguish one group from another and is mostly passed from one generation to the other (Hofstede et al. 2010; Adler, 2002). It is very evident that culture is thus complex parameter and thus making it lack a commonly accepted definition. Bik (2010) states that it is the different values, beliefs, behaviors, and attitudes that are passed from one generation to the other that makes a culture unique. As such, the cultural atmosphere surrounding individuals is what influences their way of living, and this does not only form the societal level but also national and organizational.

Productivity 

Productivity is defined as the total efficiency and output that is generated by any operational system. Productivity is made up of two factors; inputs and outputs. The inputs are the employee hours, raw materials, monetary units, and power used in the generation of outputs. The outputs include the processes upon which the inputs are turned into valuable products or services. For productivity to be high, the rate of output generation must be higher than the rate of input provision, and this is made possible through streamlining the internal operational or a system. Productivity is a vital concern for business managers, politicians, and public as it leads to positive economic growth.

Innovation 

From current research, the term innovation has had numerous definitions, and this makes it hard to have a clear definition of the term (Baregheh et al., 2009).In the modern literature, various proxies of innovation have been used in defining the term such as research and development, new and innovative ideas, new product development, patents among others (Yang & Li, 2011; Dedahanov et al., 2016; Rhyne et al., 2002). However, regardless of the innovation purpose defined by various scholars, Baregheh et al. (2009) state that two obvious points emerge, that is, it involves generating new ideas, and it involves the transformation of various processes in a multi-stage process and coming up with new products or services. Rujirawanich et al. (2011) state that innovation will thus involve using new ideas, organizational structures, programs, plans, administrative systems, technology, and products or services with an overall aim of enhancing the growth and performance of a nation o, individual or nation and ensure it remains sustainable and attain success.

Methodology 

Following the study objectives, a systematic literature review was used in determining the affiliation between culture, innovation, and productivity. A systematic literature review allows one in using findings from previous researchers by obtaining relevant studies (Deng, 2012; Macpherson & Holt, 2006). A case study of two nations will support the systematic literature review; Germany and Japan. The relationship between the culture, innovation, and productivity will be explored on how the two nations were able to supersede the victorious camp of France and England following their defeat in World War I and World War II.

Literature Review 

Historical Background 

Japan’s involvement in World War I began after the nation signed an agreement with Fascists Italy and Nazi Germany in 1940 (Beevor, 2012). The terms of the agreements would see the three nations becoming allies and assisting each other in case other aggressors attacked any. The French had occupied China, and Japan sent its troops in 1940 as, at the time, Japan had conflicted with China since 1931 (Beevor, 2012). This was after the Manchurian incident that is a Japan initiating a railway explosion and blaming it on the Chinese (Matsusaka, 2004). However, in 1940, the USA laid down economic embargos on Japan’s oil and steel to force them to withdraw their troops from French Indochina (Yergin, 1991). The Japanese ruler at the time Hirohito declined the request and instead on December 7, 1941, Japan planes bombarded USA’s naval base at Pearl Harbor, killing more than 2000 people (Kawamura, 2016). It is at that point that the USA declared war on Japan.

However, before the attack on japan in 1941, the USA was funding the allies through the Lend-Lease program (Folsom & Folsom, 2011). This would see financial and military aid being sent to the UK and France by the USA and other nations that were at war with Japan. However, the USA joined the war and assisted Britain and France in fighting off against Japan, Germany, and Italy (U.S Citizenship and Immigration Services, 2013). It was only until 1945 when the war ended following the dropping of nuclear bombs on Nagasaki and Hiroshima; two japan cities that Hirohito surrendered (Ham, 2014). However, by the time Japan had surrendered, the war had left millions of people dead and had lost more than 50% of its national wealth. However, more than three and a half decades later, Japan becomes one of the largest economies. The postwar economic takeoff of Japan was due to a variety of factors, and this is what the paper aims at exploring culture, innovation, and productivity.

Before World War I, Germany was amongst the leading economically, and military developed nations in Europe. However, after the war, the nation fell to France and Britain. Before the war, German soldiers were well trained and had superior weapons (Tucker & Roberts, 2006). However, Germany lacked the colonies that France and Britain had at the time, and through such large empires, Germany was defeated, as it did not have large army numbers and people who would fight for longer (Hart, 2008). Germany’s Schlieffen Plan aimed at knocking out France did not work due to the French resistance at the first battle that took place at Marne (Ehlert et al., 2014). Germany’s use of submarines that saw Britain defeat Germany. The German submarines sunk ships carrying USA citizens, and this saw the USA joining the war to assist Britain, and in 1918, Germany was forced to accept the armistice terms and conditions (Doenecke, 2011). World War II was also another catastrophic battle for Germany as it lost millions of soldiers. Despite the efforts by Hitler’s army to defeat Britain, France, and the USA, Germany retreated in 1943 (Citino, 2012). However, Germany had already lost millions of lives, and its economy was on the brink of collapsing. However, by 1980, the losing nations, Japan, Italy, and Germany had a higher per capita growth as compared to other European nations that had won, including the USA.

Empirical Literature 

A substantial portion of the infrastructure in Germany and Japan was left in ruins and shambles as the Allied Forces bombarded them during World War I and II. In Germany, the city of Dresden was destroyed while in Japan, Nagasaki and Hiroshima were inhabitable due to the nuclear bombing (Joel, 2013; Feis, n.d). The two nations also lacked enough men who would help in rebuilding as the 18-35-year-olds were either killed or maimed in the war. Germany, in itself, was occupied by four other countries and thus was divided into halves (Kesternich et al., 2014). The Soviet policy was mainly influencing the Eastern half of Germany while Western Germany was rather democratic (Harrison, 2005). Berlin was between the two parts and was divided by the Berlin Wall. However, the Berlin wall fell in the later 1980s, and the entire German nation was united (Kesternich et al., 2014).

The history of Germany and Japan is similar in that; the two fought side by side, especially during World War II against Britain and France. Despite the huge economic, losses, and loss of lives, Germany became the third-largest economy after the USA and Japan in terms of GDP during the 1980s. Germany’s economic recovery was referred to as “The German Economic Miracle or Wirtscaftswunder.” However, the looming question is how did this come to be?

Before the wars, German was a leading innovation-oriented cultural nation. This was a strategic resource as it helped the country in being open-minded, taking risks, and embracing innovation. The culture of the Germans was one that believed in the participation of all members of the community as being a shared responsibility (Kenny & Reedy, 2006). Once people world in unison, they are bound to boost the levels of productivity, and the human capital value is maximized. This was very different from what many other nations thought as productivity comprising of an equation based on effort versus output. In Germany, productivity was believed to comprise of innovation, technology, people, and culture. Without a strong national culture, innovation cannot exist, and nor does productivity. However, after the war, Germany was split into halves, but the strong culture was still intact. Ludwig Erhard played a crucial role in uniting the divided German into one state (Mierzejewski, 2004). He ensured that he supported the innovative and increased work productivity of the Germans by introducing a new currency in Germany and facilitating the growth of Western Germany that was on the brink of collapse (Henderson, 2008). The new currency was widely accepted across Germany, unlike the old currency that had lost value (Tribe, 2001). After the people realized the new currency had value, they resumed back to work following long hours of missing work (Tribe, 2001). Elimination of price controls also allowed people to work, Germany’s industriousness resumed, and by 1980, the nation was leading in terms of GDP.

During the Second World War, Japan’s economy had already developed as the nation involved itself in the production and exportation of machinery, nonferrous metal, and steel. However, after the war, a considerable number of the industries were destroyed; however, it is during this time that more than ten major automobile companies emerged such as Toyota, Honda, Isuzu, and Nissan. The nation’s government sought loans and invested hugely in innovative technologies, and the 1950s; Sony had become a global leader in consumer electronic goods innovation (Gordon, 2003). Additionally, the Japan work culture was one based on welfare society rather than a welfare state. The aim of this was to ensure that there were no business cartels who would control total employment through bankruptcy. The aim of this would also ensure that the Japanese government did not lose any money it lent the business. Productivity was boosted by the nation’s huge investment in technology, and much of the produced products and services would be exported to other nations (Gordon, 2003). However, not all this would have been possible had the Japanese citizens not played a role. The Japanese consumers had to bear the burden of allowing their companies to sell their product aboard. Back in Japan, the products were sold much more expensive, and after the war, they had to redirect their devotions to the nation towards economic expansion rather than military (Pyle, 1996). They were exhorted as being more superior and homogenous than other Asian nations, and it is this mentality and culture that saw japan growing into a global economy after World War II (Gao, 2001).

Conclusion 

Relying on the literature review a case study of two nations; Germany and Japan before and after World War I and II. The research has been able to fill the previous gaps in knowledge related to the relationship between culture, innovation, and productivity with regards to a country’s development. The findings reveal that indeed, there is a substantial influence on national cultures, innovation, and productivity. The influence between the three elements is bound to vary across time as witnessed form the case of Japan and Germany. The two nations came from war-caused rumbles to becoming one of the top three leading economies after World I and II despite being losers. The impact of culture on innovation and productivity has been changing over the years as in the modern world, other nations have overtaken Germany and Japan, and this is mainly attributed to the increased globalization, which has negative impacts on innovation. Kenny & Reed (2006) state that, in the modern world, nations have begun acknowledging that innovation is key towards productivity. By adopting new technologies, productivity is bound to improve. However, it is the type of culture that the people have which determine whether they will become innovative and productive. The globe has also faced serious financial difficulties in the 2010s, and this has affected most of the industries not only in Germany and in Japan, but the entire globe (United Nations, 2010). However, the industries have had a continuous process of learning, this is what builds innovative ideas, and this innovative model is the current model being used at not only the organizational and individual level but also national level (Demirci, 2013). However, despite finding out that, an amalgamation between culture innovation and productivity is positive; there is a need for future research into the negative impacts of the relationship. It is this relationship that the World Wars started in the first place as nations sought to display their dominance using technology while others like Germany had a negative culture supported by Nazism.

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