MBA 7101 - Impact of Innovation on Employee Performance Review

This mini literature review examines the impact of innovation on employee performance, drawing from various academic articles and studies. It identifies different types of innovation, including product, process, technological, and organizational innovation, and analyzes their effects on employee performance. The review highlights both positive impacts, such as increased creativity and motivation, and negative impacts, like employee resistance to change and initial productivity declines. The literature also discusses the role of external factors like globalization and technological advancements in driving innovation and influencing employee competencies. Ultimately, the review emphasizes the importance of innovation for organizational growth and competitive advantage, while also acknowledging the need for effective change management to mitigate potential negative consequences on employee performance. The document is available on Desklib, a platform offering a range of study tools and resources for students.

Mini literature review
Mini literature review: Impact of Innovation on Employee performance
5/30/2019
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MINI LITERATURE REVIEW 1
Literature review
Performance of the employees is a key aspect for any enterprise that would be turned up to be
factors for the success or growth of an organization. There have been various studies conducted
considering innovation to be the key element that would affect the employee's performance in an
organization. Innovation is the major element in the multinational organization to attract
customers and improve the process of the organization. It can be said that innovation is important
for the organization in every aspect but its major and direct impact is on employee performance
in an organization (Ahlin, 2014). It has been identified that there are various factors that are
responsible for the employee performance improvement or degradation and innovation is one of
these factors that are responsible for employee performance. Employee performance is
responsible for the improvement of the overall performance of the business and it has been
identified that innovative activities in the organization improves administration process and
enhance management work making it more effective and efficient. Scholars had researched the
product, process, organizational innovativeness, and technological innovation to be affecting on
the employee's performance. Tenaga Nasional Board is Malaysia’s key power utility enterprise,
which is working towards innovation for years (Birasnav, 2014). WIT-ICC that is work
improvement team innovation creative circle is one of the innovative platforms of this board that
has considered resolving the problems and enhancing the working environment of the enterprise.
The study has been conducted reflecting the employee performance to be upgraded due to
innovating in this organization. According to the research, it was identified that employee is
connected to the customers of the company and are aware of the market and interacting with
various external stakeholders, through which they can provide various new and novel ideas to the

MINI LITERATURE REVIEW 2
company which could be used by the company to gain competitive advantage (Karakas et al.,
2017).
Subsequently, the employee behavior has a vital influence over human resource management and
innovation turn out to be essential for scholar and researchers. Literature delivers the diverse
stream of substantiation that innovation has been initiated on or after the human resource
performs in which employee actions and approach approaches towards the innovation. Range of
human resource performs providing the employee to acquire inventive or competencies.
Nevertheless, personnel display behavior proportionate with the method the business displays an
obligation to them as entities (Betton, 2017). Consequently, once enterprises want their
employees to show innovative work behavior, they need to focus on creating a commitment to
the workforce. Employee performance is regarding the way that would be helpful for the
employees to achieve the goals of the organization and reflects the interpersonal conduct of the
norms of the organization. The researchers study the ways to measure the employee's
performance that would be influenced by non-financials element and would include motivation,
competency, teamwork, and self-discipline (Saunila, 2016). Studies have determined that
employee recommendation systems are a valuable way to reap and make use of personnel’s
creative thoughts. To be powerful, personnel have to be influenced to think creatively and to
contribute within the inspiration appliance. However, motivating employees to take part in a
collective weak spot of suggestion systems were unfortunate (Shuck, 2014). Motivating
employees include more than truly providing recompenses to submitters if their
recommendations are put to apply. Consistent with expectancy theory, rewards will handiest
encourage behavior if the rewards are appreciated, if they are intently linked to successful
performance, and if employees agree with that they can perform effectively (Ford, 2017). The

MINI LITERATURE REVIEW 3
paper smears expectancy theory to the trouble of motivating employees to contribute in a
proposal system. The researcher describe proposal system era on the way to boom employees’
motivation to think creatively and participate in the device (Som & Aguenza, 2018).
In some of the study, it has been found that the process of innovation and product innovation
effect on employee performance varies. Process innovation is implementing an innovative idea
through the operational process in the organization that would change the working pattern and
may change the whole job description of an individual. For instance, the implementation of
digitalization from manual work has changed the working process for the employees affecting
employee’s performance (Alves & Sousa, 2018). This could be resisted by an employee in the
first place but would be helpful and increase the productivity of the organization in the long term
of implementation. Therefore, according to researchers the relationship between innovation and
employee performance is positive (Javed, 2015). Another type of innovation is product
innovation, which is the introduction of a new idea to improve or development of the new
product. This would be the introduction of services or goods that is significantly new and can be
improved to enhance the company’s product efficiency, which would also affect the employee’s
performance. It has been identified at the product innovation is correlated to the performance of
the employees (Biemans, 2018). It can be said that through product innovation the human
resource competencies can be improved and would be helpful for the organization to solve the
problem. The reason being creativity, which is commenced with the employee’s right skills
applied to the right place. This will not only responsible for the idea generation but would also be
responsible for innovation and correct action to be taken (Osman, 2016). Moreover, through
product innovation and involvement of employees for the help the managers and leaders of the
organization to keep them motivated to perform which actually reflects in their productivity.

MINI LITERATURE REVIEW 4
Another type of innovation that has been considered by the researchers to study the relation with
employee performance that is technological innovation. Technology is the major cause of
innovation in most of the industries (Bruns, 2013). The literature includes that the technological
innovation related to the services, production, and product involving the use of preexisting
technologies integrated by new technology that is updating the existing technology, or
completely new technology to be applied to the organization. It has been identified that this type
of innovation would be helpful to the companies in searching for an innovative idea and learn by
amenable of external knowledge related to technology. The employees enhance the service and
goods values through technological innovation that would also affect the method of doing work
that will have a significant effect on employee performance (Olughor, 2015).
Another innovation that has been researched for correlation with employee performance included
organizational innovation. Organizational innovation includes the introduction of a novel method
in the company’s business activities and the working environment of the enterprise or may also
be related to external relation (Camison & Fores, 2016). The relation of organizational
innovation with the efforts of administrations while renewing the procedures, routines, systems
and mechanism of organization. This has also enhanced relations with the performance of the
employees. It was identified that the enterprise tends to invent to the administration process to
enhance the performance of the firm while diminishing the transaction and administrative cost
and result in improved working satisfaction of the employees. Other than this organizational
innovation would also enhance the creativity in the individual performance, which may result in
the creation of creative firm output (Fazlıoğlu, 2019). According to researchers the efforts on
innovation results into the gaining productivity of the organization like that the innovation would
be responsible for improving the organization productivity and efficiency. It would also helpful

MINI LITERATURE REVIEW 5
for the firm to decrease the cost to the company by improving the efficiency of the organization
and optimum utilization of all the resources specifically human resources (Chatzoglou &
Chatzoudes, 2018).
However, there have been some negative impacts observed of the innovation on the organization
and employee performance. It has been observed that the companies that are very much involved
in innovation could be identifying the increasing rate of employee turnover. The reason for this is
the rapid change in the employee job profile and working which makes them struggle to learn
new process every time that is the major cause for resistance to change also. Moreover,
innovation at a time is found to be the result of hit and trial method that could result into poor
performance or failure of an innovative idea by the company, which could eventually negatively
affect the employee performance (Fazlıoğlu, 2019). After innovation, the initial phase of the
organization include major changes to be implemented which involves major cost to the
company in form of training provided to the employees to work as per the innovative process.
This decrease the productivity of the employees for time being that is for the short term. The
change management by the leaders in the organization can diminish or handle the negative aspect
identified that is resistance to change. Moreover, the organization innovative culture
development would also help to eventually work for the effective implementation on innovation
in the organization and have positive impact over the business performance as a whole.
In addition to the types of innovation to be affecting the employee performance, the literature has
identified different phases like global warming, globalization, the era of internet that were the
key elements for the innovation to be implemented and has impacted the organizational
performance and competencies of the employees of the organization. It has been observed that
these reforming eras were making the organization environment more complex. For instance the

MINI LITERATURE REVIEW 6
globalization and increased the international trade and increase in competition in the domestic
and international market. Increased competition has provided a major reason for the companies
to be innovative in order to retain the existing customers of the company. Moreover, this era has
shifted the focus in most of the industries from a product orientation to service orientation, which
has affected the employees to work in the organization (Javed, 2015). Therefore, according to
authors the innovation impacted the employee's performance and the innovation is impacted by
the organizational work and external factors. It was identified that the performance of
employees in an organization were directly related to organizational growth and profit in order to
accomplish strategic objective of the company, due to which it could be said that the major cause
for desire of innovation for the organization is increase in business performance and enhancing
the competitive advantage of the company. The research has been conducted reflecting the effect
of innovation of the firm s performance applicable to SME’s (Olughor, 2015).
Therefore, from the literature, it can be said that innovation has a major impact over the
employee’s performance of the organization in various field and industry. There are various
types of innovation like product innovation; process innovation, technology innovation, and
organizational innovation have various effects on employee’s performance in an organization.
Other than the positive impact like an increase in creativity, new idea generation motivated
employees, and an increase in employees competencies there are negative impact or influence of
innovation too. For instance, some of the negative aspects identified through researches involved
resistance of employees for change, increase in the employee retention rate of the organization
and initial decrease in productivity of the organization as a whole due to the learning phase of
employees after major innovation and change in an organization (Alves & Sousa, 2018).

MINI LITERATURE REVIEW 7
References
Ahlin, B., 2014. Entrepreneurs’ creativity and firm innovation: the moderating role of
entrepreneurial self-efficacy. Small Business Economics, 43(1), p.101.
Alves, A. & Sousa, P., 2018. Implementation of project management and lean production
practices in a SME Portuguese innovation company. Procedia computer science, 138, p.867.
Betton, P., 2017. Competitive Strategy: Creating and Sustaining Superior Performance. Macat
Library.
Biemans, W., 2018. Managing innovation within networks. London: Routledge.
Birasnav, M., 2014. Knowledge management and organizational performance in the service
industry: The role of transformational leadership beyond the effects of transactional leadership..
Journal of Business Research, 67(8), pp.1622-29.
Bruns, P., 2013. Corporate Entrepreneurship: Innovation and Strategy in large organisations.
3rd ed. london: Palgrave MacMillan.
Camison, C. & Fores, B., 2016. Does incremental and radical innovation performance depend on
different types of knowledge accumulation capabilities and organizational size? Journal of
Business Research, p.831.
Chatzoglou, P. & Chatzoudes, D., 2018. ). The role of firm-specific factors in the strategy-
performance relationship: Revisiting the resource-based view of the firm and the VRIO
framework. Management Research Review, p.46.
Fazlıoğlu, B., 2019. The E ect of Innovation on Productivity: Evidence from Turkishff
Manufacturing Firms. Industry and Innovation, 26(4), pp.439-60.
Ford, J.K., 2017. Employee perceptions regarding an organizational change initiative in a state
wildlife agency. Human Dimensions of Wildlife, 22(5), pp.422-37.
Javed, A., 2015. Impact of Innovation on the Performance of Employees. IISTE, 5(12), p.1.
Karakas, Ayhan & Öz, Yaşar & Raşit & Muhammet, 2017. THE EFFECT OF INNOVATION
ACTIVITIES ON ORGANIZATIONAL PERFORMANCE: A RESEARCH ON HOTEL
BUSINESSES. Journal of Recreation and Tourism Research, 4, pp.49-59.
Olughor, R., 2015. Effect of Innovation on the Performance of SMEs Organizations in Nigeria.
Management, 5(3), pp.90-95.
Osman, S., 2016. Does Innovation Contribute to Employee Performance? Procedia - Social and
Behavioral Sciences, 219, pp.571-79.

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Saunila, M., 2016. Performance measurement approach for innovation capability in SMEs.
International Journal of Productivity and Performance Management, 65(2), pp.162-76.
Shuck, B., 2014. Employee engagement and well-being: A moderation model and implications
for practice. Journal of Leadership & Organizational Studies, 21(1), pp.43-58.
Som, A. & Aguenza, B., 2018. Motivational factors of employee retention and engagement in
organizations. IJAME, p.1.