Innovation & Culture

This article was first published in 2003

Innovation and Culture

An Analysis regarding the Relationship between Culture and the Process of Innovation

B.J. Rao, Ali Sermet, Dragana Mijatovic

Keywords: Culture, Innovation, Hofstede, Dimensions, Innovation Index

Abstract

Common sense would conclude that culture might be an important component of the process of innovation mechanism. This report examines that relationship. More specifically, it is an attempt to develop a “starting point” to provide more deterministic clarity on how culture plays a role in the inventiveness of people. Statistical analysis tools are applied to present numerical verification as well as possibly more insight regarding the qualification of relevant elements. Cultural dimensions [Hofstede] form the independent variable while a filtered patent count per nation serves as the main innovation indicator. However, despite a seemingly objective and logical approach strong relationship could not directly be found. This does not necessarily conclude that the logic nor the resulting model is defective. The model may simply be incomplete, as the investigation has by no means been exhaustive. Still the results do, to some extent, correspond with the logical assumptions made. These results may prove to at least approximate ballpark values and serve as a foundation for subsequent study.

1 Introduction

1.1 Culture, Business and Technology

The longstanding interaction between business and technology forms the basis of all prosperous civilizations. Technology facilitates the means to enhance business potential and develop more certainty of security and continuation. This connection can be illustrated throughout history ranging from the Egyptians to the Americans and from Bronze Age to the Information Age. Business motivates the development of technology and technology supports the leveraging of business goals. While this has been apparent it is becoming more structured in the modern age as technological tools advance.

It is not surprising that many nations heavily fund the development of technology. This widens the technological knowledge base of a nation to create, develop and apply technology to serve business goals. Within this process system, inventiveness or innovation can play a very significant role in expanding this base. Simply stated technological innovation can lead to better sustaining business as well as gaining an edge in business.

However, for a number of reasons the industrial inventiveness of nations are not equal. While this may be obvious, localizing and characterizing the mechanism is not a trivial task. In compounded form the reasons that surround the process of innovation largely have to do with:

Process of Innovation Factors

  • Environment
  • Motivation
  • Culture

What differentiates the first two elements with the last is that culture may play the most fundamental role in this process. It is after all people that get things done. More specifically, it is the mannerism, in which they work, communicate, and their attitude that has significant bearing on the effectiveness of the process.

Although inventiveness is commonly attributed to a particular person, such as Tesla or Edison, these usually only represent the faces that overlay the result of a much more intrinsic process that preceded. Innovation is more commonly a result of a particular social setting that enables a compiled and networked handling in the development of inventive solutions.

It is the incentive of this study to investigate as well as attempt to shed light on the bearing and significance of the cultural aspect within the process of innovation. Statistical tools will be used to provide numerical verification. In particular this will include regression analysis. In order to perform this analysis the data employed needs to be filtered and formatted to exclude non-relevant aspects. This processing is based on facts as well as logical assumptions to best permit the data to be objectively compared.

1.2 The Innovation Indicator

1.2.1 Innovation Process Elements

While science is the search for what already exists, technology is the creation of what has not existed before. Hence, innovation requires taking an inventive step beyond and establishing something new.

There are several models that break the innovation process down into elements. The Veech Success Model that relates to innovation, for instance, states that the following elements are of relevance:

The Veech Success Model

  • Personal Effort
  • Community Support
  • Resources
  • Information
  • Results

However the culture factor seems a bit entangled here and even lost in this definition rank up. The elements are too pragmatic and specific for the purpose of this study. The previous section disclosed a more global selection of components. These included a larger scope of the mechanism and have been listed below along with elaboration:

Innovation Factors

Environment. This represents the means within a surrounding and includes such items as Funds, Facilities, Working Conditions, Information/Knowledge, National Issues and People in terms of education, population size, wealth and aptitude.

Motivation. This represents the stimulant, which may be based on Status, Economics, Challenge, Purpose Camaraderie, Responsibility and Personal Growth.

Culture. Social Interaction and Reasoning Mechanism, History and Identity.

It should be noted that these components do not work singularly. Actually they work in an interactive fashion which can make them somewhat difficult to separate without effecting the system. Also, with regard to the first two, their proportions may have different effects on different cultures.

1.2.2 Innovation Index for Culture

The significance of defining the process of innovation is to formulate a suitable way to single out and determine how to measure a nation’s innovation status. In other words what defines the degree of inventiveness of a nation. Patents may serve best as an indicator of this as they require time, effort and money to obtain. In other words people and business will only patent that which is economically valued and has innovation merit.

However, in bare form, patent count per nation cannot directly be used as it includes elements related to Environment and Motivation factors, which would corrupt the data. For instance:

  • Certain nations have the capacity to provide more funds to R&D than others.
  • Certain richer countries may have the funds to attain patents for the purpose of strategically suing others for patent infringement. This can reflect in higher patent count yet this has little to do with how culture specifically influences innovation (although strategy is also a form of innovation). The motivation factor may be very high despite limited funds and facilities. Take for instance the Russian space program.
  • Certain assumptions need to be made in order to distill and align this indicator to reveal only its inherent cultural aspect. Subsequently, an industrial innovation indexes for cultures (IIC) can be established to statistically analyze the innovation relationship with a sufficient level of integrity.

It should be noted that simply subtracting factors from patent counts to better formulate the IIC indexes per country can not proceed indefinitely without some penalty. The signal to noise ratio after each iteration recedes. To minimize the inclusion of statistical noise [Duchatteau] care must be exercised to omit the fewest and only the most significant factors.

The criteria to derive to the IIC value per nation will be explained in the next sections.

 1.3 Crash Course in Culture

There are a vast number of different definitions for culture. However like language is a tool to receive, process and convey information, using verbal and written symbols, so is culture a tool on how to do this in a socially correct and synergetic manner. Culture works much like a personal OS making sure things are managed correctly and with the least amount of conflict. A nation’s culture most always parallels their identity and history. Very simply stated, culture incorporates problem-solving techniques that have been incorporated into social mechanisms to survive in a particular environment in its entirety. This includes everything from its landscape to its people. And, here resides the significance of attempting to find correlation between culture and innovation. Since culture is a problem solving technique it inherently includes innovation properties.

The Dutch engineer Geert Hofstede established a more in depth as well as an applicable definition of culture. More precisely, he defined and categorized the differences between cultures. Hofstede established 4 (now 5) quantifiable dimensions to represent these cultural differences. This definition can be applied to all existing cultures to provide more deterministic insight about what can be said about a people. The 4 dimensions include:

  • Power Distance Index (PDI). Relates to social equality, or inequality, between people of a particular society. Japan, for instance has a high Power Distance rating indicating that there is greater social distance between people of different social status. Mobility is more difficult upward the social ladder. However people can more or less only bypass social rank through personal relationship. A low Power Distance ranking indicates fewer barriers between vertical social statuses. However bureaucracy is usually higher to compensate.
  •  Individualism Index (ICI). Pertains to interpersonal relationship and to either an individual or a collective manner of working to achieve goals. Individualistic societies tend to have many loose relationships with others while collective societies tend to share responsibility for each other with greater interpersonal bonds and correlation.
  •  Masculinity Index (MFI). Masculine societies tend to focus on results and achievement rather than on the quality of life in the sense of care and equality among, for instance, gender for oneself and others. Holland has a low masculine rank indicating that the society is concerned more for the well being of its people that solely achievement.
  •  Uncertainty Avoidance Index (UAI). Pertains to the level of retreating from entering unfamiliar situations. Low Uncertainty Avoidance societies tend to be more reactive in their problem solving techniques. They are more solution oriented rather than focussing on first clearly defining the problem to determine what solution best fits. However they will more easily except diverse opinions and move into new areas. High Uncertainty Avoidance societies tend to be more preventive and rule orientated. In order to gain certainty they will examine all possible areas to reduce failure.

2. Facts and Assumptions

It is necessary, to more clearly produce an applicable industrial innovation/culture model, to first investigate the properties of an ideal observation setting. This ideal setting would include:

  • Large group sizes that each represents a nation’s culture. This is done to induce high sample sizes for statically reasons.
  • Many similar as well as dissimilar cultures represented that follow existing combinations of cultural dimensions. For statically reasons.
  • A sufficiently long observation time. For statically reasons.
  • Environment and Motivation factors that pertain to the process of innovation are held constant for each group and at a sufficiently high level to promote innovation. For instance, the threshold must be above the Maslow pyramid section of security. There must be equal push and means.
  • Each member of a group is granted mobility to move around and even correspond with other groups. Certain cultures may more easily trek to other cultures to attain information. These are not spies.
  • Each group receives a list of generic problems to solve. This is to equalize the level of difficulty that the problems pose among different cultures. Certain cultures may have more aptitude to solve particular problems than others due to historical reasons.
  •  The time to formulate, applicability and uniqueness of the solutions are examined and quantified. This is to diversify statistical data.

In order to approach this situation the following assumptions and decisions are made:

2.1 Innovation Indicator Assumptions

What parts of the patent counts per nation are related to innovation based on culture?

Traditionally and still today the USA has the largest homogeneous market in the world. If an idea is sellable then it will likely best sell in the US. Countries around the world will aspire to patent their truly innovative ideas in the US to gain the greatest economic reward. With this in mind the distribution of patents per nation at the USPTO is used as the patent count database.

Obviously the count still contains contaminated data. The first aspect regards the fact that it is the US home office. US patents will, along side patents granted for true innovation, also include petty patents and patents applied for, not necessarily to protect ideas but to sue others (Business Revenue Strategy Patents). This applies to some lesser extent to other nations patenting in the US as well. The latter is a source of new revenue that is prevailing more and more in business, especially when it comes to software and biotechnology development [Reback]. The USPTO also favors American registrations more than foreign. It is likely that the US patent count will be contaminated with these patents more heavily than others will since it is their home office. However, BRS patents can also be considered a form of innovation that is related to culture. Although not industrial they could still be accepted to include them in the patent count. That leaves the petty patents to be compensated for.

Ideally the patent count that a nation has in the US should be subtracted from its patent count in its own country. This is a bit more complicated to do for the US as this data is not readily available. This process step would filter out the less important patents that do not directly represent the innovation aspect of a nation. Another approach would be to simply omit the US aspect entirely. It is likely that the other nations patenting in the US have more relation with regard to this aspect than in comparison to the US. Also, although the US is today an economic powerhouse, omitting it should not substantially defect the model. The assumption is that the US cultural dimension is not an exception. It shows similarity with the UK cultural dimensions, which would compensate for its absence. However these issues can not be fully substantiated and will require more in depth study to support. It also needs to be mentioned that this study is not searching for the nation with the best innovation capacities. In other words this is an examination of which cultural dimensions contribute most to innovation, not which nation.

To further accomplish this filtering, in a fair manner, only those countries that have similar economic and education status to the US are used in this analysis. What is being done is selecting a group of nations that differ culturally but have less variation with regard to their Environment and Motivation factors. These countries include (country code followed by country):

Country Code

Country

Country Code

Country

1

US

12

Switzerland

2

Japan

13

Finland

3

Netherlands

14

Australia

4

France

15

Belgium

5

UK

16

Austria

6

Germany

17

Denmark

7

S. Korea

18

Spain

8

Canada

19

Norway

9

Italy

20

Ireland

10

Israel

21

Hungary

11

Sweden

22

Russia

Other main Environment and Motivation factors that can contaminate the patent count include:

  • Working Population. Simply stated, if there are more people working on innovation than to some extent there is more activity and resources and there also is greater opportunity to be innovative.
  • Government and Industry Support. Certain governments and businesses may have the capacity to much more heavily fund the process of innovation than others. To find evidence of this the publication count for nano-technology research is used. Nations that support the frontier of industrial science and technology usually also have the capacity to do so. The push to publish will be higher, but that again just shows how significant the support is.
  • GNP per captia. What is the wealth of a nations citizens. Greater wealth may induce a greater diversity of and access to knowledge and facilities at work as well as at home.

2.2 Cultural Dimension Assumptions

What dimensions of culture, and in what proportions, relate to increasing innovation potential?

Based on Hofstede’s work there are 4 main dimensions to differentiate culture. Unfortunately there is no compounded and quantified way to represent cultures in a single format. Yet regression analysis permits the use of multiple independent variables. But this is only permitted if the variables are unrelated or at least sufficiently unrelated. However previous studies have concluded that there are relationships between dimensions. Yet there may still be a way to employ the data. Included be below are several properties regarding the cultural dimensions:

  • PDI has strong negative relation with ICI.
  • PDI has a less strong positive relation to UAI.
  • MFI has no relation to the first three dimensions.
  • MFI values tend to reside at higher levels than at lower levels of the index spectrum.
  • PDI, ICI and UAI values tend to be more evenly spread out than MFI.

What can be said about these characteristics is that only a finite combination of cultural dimension proportions is possible (excluding MFI). In other words it is virtually impossible to have a very high PDI as well as a very high ICI value. Hence, if a country’s PDI value is known then something can directly be said about its ICI value and to some extent also about its UAI level. PDI could also be exchanged with ICI within this logic depending on which of the two variables will reveal the most information.

Within multiple regression analysis either the PDI or the ICI could be used as an independent variable. MFI could be the next independent variable. Since the spread or distribution of MFI is less than with the other dimensions it may be of interest, with some caution exercised regarding the interpretation of data, to use MFI as a dummy variable. The turning point between 0 and 1 could be the mean MFI value for the participating countries.

2.3 The Expected Innovative Culture

Based on common sense what could be expected to contribute to more effective and efficient innovation based on cultural dimension? And, what is expected to be the ranking order of significance for the 4 dimensions?

Expected Successful Cultural Dimension Combination for Innovation

Dimension

Rank

Expected

Validation

PDI

1

Low

Low PDI will permit more horizontal and vertical communication within the organization.

UAI

2

Low

More tolerant to look into new areas.

ICI

3

Moderate

Individuals working together share ideas and responsibility.

MFI

4

Moderate

Achievement oriented as well as making sure others are heard.

Expected Unsuccessful Cultural Dimension Combination for Innovation

Dimension

Rank

Expected

Validation

PDI

1

High

Not enough vertical communication permitted. Too much relationship is required which adds personal interests to the process.

UAI

3

High

Less tolerant to take risks and look into new areas.

ICI

2

Low

Not enough sharing of responsibility for others.

MFI

4

Low

Not enough result orientated.

2.4 Materials and Methodology

To produce the IIC Index the following data was used:

  • Patent Count. Granted patents amount per nation during 2001 at the USPTO.
  • GNP per Capita. GNP per capita per nation.
  • Work Population. Work Population between 15-64 years of age per nation.
  • Tech Investment. Publication count per nation in the nano-technology sector.

All above data was made relative. The relative Patent Count per nation was divided by the multiplied value of the relative GNP, Population and Tech Investment values. The results for each country were then made relative to a reference country, in this case the USA. This produced the IIC Index for each country, which represents the dependant value.

The PDI and MFI (as a dummy variable) for each nation were used as the independent variables in a multiple regression analysis. The MFI turning point from 1 to 0 was at the MFI means.

Investigation of possible relationship between PDI and MFI was carried out. Further investigation regarded examining the integrity of the produced results based on R, R Square and auto correlation.

2.5 Data Integrity

It should also be noted that the Hofstede dimensions employed were taken from resources that data back about ten years ago. Things may have changed. Also, the dimensions are relative approximations that relate to a complex model that contains many attributes. They are not hard values.

The patent data represents values from early this century and are not based on average values over a period of time (snapshot).

With this in mind it is unlikely that very high R Square values can be expected. Also this investigation regards a preliminary investigation aimed at providing some degree of approximation. The incentive is to provide the examination means to become better orientated in this particular relationship mechanism. In subsequent studies more attention needs to given to the integrity of the data to make a valued assessment of the situation.

3. Statistically Evaluating the Model

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5. Conclusion

A hard correlation between culture and innovation could not be substantiated. However to some degree the results do allow one to become orientated about how to qualify the effects of culture on the process of innovation. Further investigation would be required to establish a better model and a more quantifiable as well as more applicable conclusion. Better data on the side of creating a more accurate the IIC Index and cultural dimension would be the initial tasks of a subsequent study.

While PDI, ICI and UAI have relation these do not find correlation with MFI. MFI was used as a dummy variable. When used normally (not as dummy variable) the resulting R square and p values became somewhat impaired.

Both graphs illustrate a negative slope. This concludes that raising PDI will cause the IIC Index to recede. ICI will therefore also recede in strong proportion to the increase of PDI. UAI will, to a lesser degree increase. These results show some agreement with the assumptions made for the successful Cultural Dimension Combination for Innovation. Otherwise stated, to invoke greater innovation based on culture, PDI and UAI must be at low levels while ICI must be at higher levels. This pertains at least to existing cultures and their culture dimension combination proportions. Obviously this only provides very loosely quantified conclusions, as the analysis did not, for instance, explicitly include the UAI and ICI values. Yet since a compounded dimension for culture does not exist the only option is to do the same analysis for UAI and ICI as well with MFI values used as the second independent value.

6. References

  • Gary L. Reback, “Patently Absurd”.
  • A. Ardichvilli “Russian and Georgian entrepreneurs”, Jan 2003.
  • Anisya. S “Are Entreprenuers the same across cultures”. Thomas FL international University.
  • COMPENDIUM OF PATENT STATISTICS ORGANISATION FOR ECONOMIC CO-OPERATION AND DEVELOPMENT.
  • Marieke de Mooij. “Convergence and divergence in consumer behavior”, Comunicación y sociedad, 2002.
  • Low Sui Pheng “An exploratory study of Hofstede’s cross-cultural dimensions in construction projects”, National University of Singapore, Singapore.
  • Xavier Thavaruban Thavapragasam “CULTURAL INFLUENCES ON ERP IMPLEMENTATIONSUCCESS”. School of Computing and Information Technology, Griffith University, Nathan, Brisbane, Australia.

“Mathematics is the philosophy where the ego plays no role. That part is reserved for the applicant of this tool.” [B.J. Rao]

Copyright 2003-2012 B. J. Rao

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