The X factor? Culture of Innovation

According to PricewaterhouseCoopers, over half of innovating companies struggle with bridging the gap between innovation strategy and business strategy, flagging it as their greatest strategic challenge when it comes to innovation. That’s more than twice as many that point to any other strategic challenge. Both in literature and in research a lot of attention is paid to identifying the most critical success factors for innovation, as well as the determinants and barriers to this success.

As there is increasing awareness and debate about the importance of the ‘soft’ skills as key to innovation success, the human factor seems to play a very significant role in the innovation process: personality of managers managing teams of employees, willingness and motivation of managers to take risks, the attitude of employees, and what the employee – employer interactions consist of, i.e. the culture of innovation.

Therefore, it’s recommended to refer to the role played by individuals in innovation and highlights the importance of recognising what they bring to firms’.  This is supported by an emerging literature which examines more tacit characteristics in SME innovation. Theory suggests that the development of this focus is a process of learning both by the individual and by the organisation as a whole. Several studies found that coaching, mentoring and specific training provided positive contributions to firms’ performance and survival. The benefits show an even stronger significance in the case of small-sized firms in the high technology sectors or ‘research-based’ firms and particularly start-ups.

However, thinking about the implementation of innovation, companies and policymakers generally focus on resources, processes and measurement of success, i.e. the easily measurable elements. Companies and policymakers often devote much less attention to people-oriented determinants (‘the human factor’) of the culture of innovation, which are more difficult to measure, such as values, behaviours and organizational climate. Although everything that refers to values and behaviours of people and climate in the workplace is more elusive and difficult to control, these ‘people-related issues’ seem to have the greatest power to shape the innovation-oriented culture and create sustainable competitive advantage

These results offer potentially important policy implications, such as the idea of moving beyond the tools-oriented innovation building blocks introducing the importance of ‘soft’ skills for innovation. The implication of the intangible characteristics of the human factor in innovation for public policy generates various issues regarding the introduction of publicly supported innovation programmes and supports, especially in the case of small firms. Creating an enabling environment to recognise and embrace the intangible characteristics of the human factor in innovation as a determinant of small firm innovation is critical. Though it may make sense, for accountability purposes for example, to invest in tangible and easily measured innovation programmes, providing more targeted, at times intangible measures such as education programmes to increase entrepreneurs and managers’ innovative human capital in support of innovation may also be necessary (maybe even more so).


McGuirka, H., Lenihanb, H. and Hart, M. (2015) Measuring the impact of innovative human capital on small firms’ propensity to innovate. In: Research Policy. Vol. 44: 965–976.

PricewaterhouseCoopers (2017) Reinventing innovation: Five findings to guide strategy through execution: Key insights from PwC’s Innovation Benchmark.

Rao, J. and Weintraub, J. (2013) How Innovative Is Your Company’s Culture? In: MIT Sloan Management Review. Vol. 54(3): 28-37.