Leadership & Organization Development Journal

Ownership and leadership in building an innovation culture

Vanessa C. Villaluz, Ma. Regina M. Hechanova,
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Vanessa C. Villaluz, Ma. Regina M. Hechanova, (2018) "Ownership and leadership in building
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LODJ-05-2018-0184
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Ownership and
Ownership and leadership in leadership
building an innovation culture
Vanessa C. Villaluz
Ateneo Center for Organization Research and Development,
Quezon City, Philippines, and
Ma. Regina M. Hechanova Received 21 May 2018
Department of Psychology, Ateneo de Manila University, Revised 15 October 2018
Accepted 23 November 2018
Quezon City, Philippines

Abstract
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Purpose – The purpose of this paper is to test a culture-building model, CREATE, highlighting the central
role of leadership in shaping the predictors of innovation culture. The authors hypothesize that leadership
directly predicts innovation culture, as well, as indirectly impacts innovation culture through mediating
variables. Also, the authors examine the impact of leadership on innovation by ownership type.
Design/methodology/approach – A total 631 survey responses were collected from employees of sole
proprietorship, family-owned corporations, and non-family corporations. Parallel multiple mediator models
were used to test the hypothesized relationships of the variables.
Findings – The findings show that a leadership variable, role modeling, and support for innovation, directly
and indirectly predicts an innovation culture. However, it appears that in sole proprietorship and
family-owned corporations, leaders impact on innovation culture are through mediating variables, while in
non-family corporations, leaders influence innovation through strategy, evaluation, and rewards.
Originality/value – The study shows that the culture-building model, CREATE, can be used as a
framework for building an innovation culture in organizations. The study also showed that leaders among
sole proprietorships, family-owned corporations, and non-family corporations may need to employ different
approaches in building an innovation culture in their organizations.
Keywords Leadership, Innovation, Culture, Ownership
Paper type Research paper

Introduction
Innovation has long been identified as a crucial factor in the ability of an organization to
thrive in the midst of competition and in preventing its obsolescence (Lafley and Charan,
2008). As such, studies have identified the factors that build a culture of innovation. Most of
these studies look at the organizational factors that impact innovation (Damanpour, 1991).
Leadership, in particular, has been shown to predict employee, team, and organizational
creativity and innovation (Hughes et al., 2018). Nevertheless, Hughes et al. (2018) have noted
that most work on leadership and innovation has been about broad leader styles and not
much has been done to determine and test the nuanced and incremental effects of specific
leadership behavior especially in the innovation and creativity literature. For example, there
may be a need to check if certain leadership styles would be more appropriate for the
different stages of the creative and innovative process or to look into the relative effects of
these styles to determine the best predictors of creativity and innovation. In addition, there
is also a need to determine which leadership variables predict mediators and a need to link
leadership to organizational processes.
Moreover, there is a growing recognition of the influence of organization ownership
on innovation. Studies linking innovation with ownership type have sampled public vs private
firms and configurations where managers are also owners (Beyene et al., 2016; Song et al.,
2015). However, studies of innovation among sole proprietorships have been sparse. There has Leadership & Organization
Development Journal
also been a dearth of research on the innovation of family firms (Craig and Moores, 2006). © Emerald Publishing Limited
0143-7739
This study then aims to contribute to the ongoing research in innovation by looking at the DOI 10.1108/LODJ-05-2018-0184
 LODJ differences in the impact of leadership on innovation culture by organization ownership,
specifically comparing sole proprietorships/family corporations and non-family corporations,
on building a culture of innovation.

Innovation culture and its antecedents

Innovation has been defined by West and Farr (1990) as “the intentional introduction and
application within a role, group or organization of ideas, processes, products or procedures,
new to the relevant unit of adoption, designed to significantly benefit the individual, the
group, organization or wider society.” Building a culture of innovation would entail
providing the environment and infrastructure that would influence employees to support
thoughts and actions necessary for innovation (Dobni, 2008), that is, innovativeness has
been said to likely occur in a work context that encourages coming up with novel and
creative outcomes (West and Richter, 2009).
This study seeks to test a culture-building framework, CREATE, that stands for
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communicate desired values, role modeling by leaders, evaluate, and reinforce desired
behaviors, align systems and resources, train for desired values, and engage employees in
the culture-building efforts (Hechanova, 2014). The model was developed using case studies
and has been applied to the cultures of integrity (Hechanova et al., 2014), but has not yet
been tested empirically in terms of innovation culture. However, there is evidence to suggest
the link between the factors in the model and innovation culture.
For example, research supports the link between business strategy and an organization’s
capacity for innovation (Elenkov et al., 2005). Innovation is also fostered in an organization
that has a clearly articulated creativity-encouraging vision (Amabile and Mueller, 2007).
In comparing the importance given by managers and staff to the innovation initiation phase
vs the innovation implementation phase, managers tend to consider the initiation phase, the
phase when people’s ideas are encouraged to flourish in a non-judgmental atmosphere, as
more important than would the staff (Anderson and King, 1991).
There is also evidence that the synthesis of creativity and innovation with an
organization’s values contributes to the creation of an innovation culture (Lendel and
Varmus, 2011). These institutional expressions of organizational support for innovation
provide employees with psychological empowerment, and thus serve as important sources
of creativity (Gumusluoglu and Ilsev, 2009b).
Innovation requires the presence of organizational structures systems, resources, and time
for innovation-related projects. Gumusluoglu and Ilsev (2009b) found that organizational
support is a determinant of innovative practices among employees. A meta-analysis by
Damanpour (1991) likewise identifies specialization, functional differentiation, centralization,
administrative intensity, slack resources, and external communication as significant
predictors of organizational innovation. Another meta-analysis of the relationships between
organizational characteristics and IT innovation adoption found that organizational readiness
to be the most significant organizational attribute in facilitating innovations, followed by
information system department size, infrastructure, top management support, expertise,
resource, and organizational size (Hameed et al., 2012). These findings validate research
conducted by Amabile et al. (1996) that found that employees’ perceptions of structural
support in their work environment form the psychological context of creativity, which in turn,
can influence their creative work.
Employees’ skills and competencies form a crucial component of an organization’s strategy
as they directly influence the organization’s overall capacity to perform (e.g. Kang and
Santhanam, 2003; Glance et al., 1997). These competencies, in turn, can be built and developed
through appropriate training. Thus, the presence of antecedent structures of organizational
support, such as a relevant recruitment and selection framework, and training, coaching, and
mentoring programs, serves as an integral element of innovation culture.
 There is emerging evidence of the relationship between engagement and innovation. Ownership and
Engagement is associated with initiative and organizational commitment and has been leadership
proven to enhance performance and decrease operating costs (Watson and Papamarcos,
2002). The extent to which employees care about the organization and are willing to exert
effort for the good of the organization serves as a crucial component of organizational
culture. Engagement contributes to a sense of empowerment and ownership among
employees, by tapping initiative and a sense of responsibility and by cultivating an
environment where employees are free to exercise their inherent problem solving,
organizing, and leadership talents (Campbell, 2000). Further, Kesting and Parm Ulhoi
(2010) argue that ordinary employees have hidden abilities for innovation and this
potential can be tapped for the benefit of both the firm and its employees. A more recent
study directly links engagement and innovation. In a study of 291 Indian managers from
various industries, work engagement regressed significantly and positively on innovation
(Bhatnagar, 2012).
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Leadership and innovation

A number of studies have also identified leadership as a significant contributor toward
creating a culture of organizational innovation (Gumusluoglu and Ilsev, 2009a; Sarros et al.,
2008; Miles, 2007). In general, leadership has been seen to “inspire a sense of mission and
purpose about the importance of the work being done, stimulate new ways of thinking and
problem solving, and encourage group members to do more than what might normally be
expected” (Keller, 1992). Leadership promotes creativity (Amabile and Khaire, 2008),
influences creative problem solving (Carmeli et al., 2013), and is positively related to
innovation implementation (Michaelis et al., 2009).
In particular, Miles (2007) suggests that leaders who recognize and acknowledge
contributions and encourage their followers to find new knowledge sources both within and
across units and organizations generate high rates of innovation. Damanpour’s (1991) meta-
analysis identifies managerial attitudes as significantly correlated to innovation.
Schneider’s (2007) review of studies on innovation in government lead her to likewise
conclude that leaders who favor the values of reinvention positively influence its adoption.
The CREATE model describes antecedents of innovation culture but does not identify the
relationship between these variables. However, studies suggest that leadership play a critical
role by influencing the various antecedents of creativity and innovation (Hughes et al., 2018).
Organizational learning, for one, had been shown to fully mediate between leadership and
organizational innovation in Taiwan’s financial and technology information industries
(Liao et al., 2016). Transformational leadership was also seen as a mediator between a leader’s
tendency to see the business environment broadly and the firm’s ability to take advantage of
both exploratory and exploitative innovation (Zheng et al., 2016). We thus suggest that
leadership support for innovation influences the factors (strategy, climate, systems and
structures, evaluation, and rewards) that enable innovation.

Ownership type and innovation

Beyond testing a general model for the factors that shape innovation culture, this study also
examines the roles of ownership on innovation culture. Jensen and Meckling (1976) said that
studies on ownership type are concerned with the relationship between the stockholders and
the managers of a firm, saying that an agency relationship exists between these two groups
as the principals (owners) of the firm can delegate decision making to agents (managers)
who may not be owners. Agency issues can surface and affect the firm when the principals
(owners) and agents (managers) have differences in terms of goals and in their inclination
for risk-taking ( Jensen and Meckling, 1976).
 LODJ Studies linking innovation and ownership have concentrated on corporations (Song et al.,
2015) and small and medium enterprises (Kallmuenzer and Scholl-Grissemann, 2017).
In their study of 242 publicly traded companies in China, Song et al. (2015) looked at the
problems of innovation that exists because of the issues between owners (principals) and
agents (managers) of an organization. They found that three ownership structure designs
(i.e. identity of the dominant shareholder, managerial ownership, and ownership
concentration) play significant moderating roles in the relationship between marketing
orientation and innovation performance. Specifically, the results indicated that the positive
relationship between marketing orientation and innovation performance was stronger in
the firms where majority of shares were not held by the state. Similarly, the relationship
between managerial ownership and innovation performance was also positive when top
management was rewarded with high-level stocks in the firm, and when the largest
shareholders extensively held firm stock shares. In general, the researchers concluded that
the more the agents (managers) were invested in the company and allowed to take risks and
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plan for the firm’s future, the more innovative they get.
In terms of SMEs, Kallmuenzer and Scholl-Grissemann (2017) explored the antecedents
of family firm innovation and its performance among family firms in Germany, Austria, and
Switzerland, which rank among the top ten most innovative countries in the world (p. 118).
In their model, technological product and process innovation (TI) and intangible
management innovation were significantly affected by the external factors of technological
opportunities (TO) and inter-organizational collaboration (IC). Given these findings, the
researchers concluded that family firms operating in industries characterized by a higher
level of perceived TO demonstrate higher innovativeness in their products and processes.
Furthermore, they were found to be more innovative concerning their management
practices, which in turn, served as enablers for product and process innovations. Indeed,
Wyld and Maurin (2009) posited that a firm’s management creates the corporate culture that
fosters radical innovation. Furthermore, they emphasized that management should create
champions, encourage experimentation, and incentivize those that would push the firm’s
innovation initiatives. Nevertheless, there have been indications that the culture in
family-owned businesses is less supportive of innovations than non-family-owned
businesses. It seems that family businesses still need to create the organizational
processes that would encourage employees to develop and implement innovative ideas
(Gudmundson et al., 2003). Given this, we examine the moderating role of ownership on the
relationship between the innovation culture and its antecedents.

Conceptual framework and hypotheses

This study seeks to make two contributions to the literature of innovation culture. First, it
tests the CREATE model for culture building but highlights the central role of leadership in
shaping the predictors of innovation culture. Specifically, we suggest that leadership
directly predicts innovation culture, as well, as indirectly impacts innovation culture
through mediating variables of communicating strategy for innovation, employee
engagement and climate, support system and structures, training and development for
innovation, and evaluation and rewards. Second, given differences in leadership because of
ownership type, it examines possible differences in the applicability of the model among sole
proprietorship and family-owned corporations and non-family corporations (Figure 1).
Furthermore, it is hypothesized that:
(1) role modeling and leadership support for innovation impacts innovation culture
indirectly through mediating variables: communicating strategy for innovation,
employee engagement and climate, support system and structures, training and
development for innovation, and evaluation and rewards;
 Ownership and
(1) Communicating
Ownership
Strategy for leadership
Innovation

(2) Employee
Engagement
and Climate
Role Modeling
and Leadership Innovation
Support for culture
Innovation

(3) Support System

and Structures
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(4) Training and

Development Figure 1.
for Innovation Conceptual model of
the relationship
among ownership,
leadership, mediating
(5) Evaluation and
Rewards
variables, and
innovation culture

(2) there are differences between sole proprietorship and family-owned corporations
and non-family corporation ownership types in terms communicating strategy for
innovation, employee engagement and climate, support system and structures,
training and development for innovation, and evaluation and rewards; and
(3) there are differences between sole proprietorship and family-owned corporations
and non-family corporation ownership types in terms of the direct and indirect
effects of role modeling and leadership support on innovation culture.

Method
Sample
The descriptive data show that out of 631 survey responses, 61.0 percent (n ¼ 383) came
from non-family corporations, while 39 percent (n ¼ 248) were from sole proprietorship and
family-owned corporations. Most of the sole proprietorships/family corporations were into
manufacturing (69 percent), followed by construction (12 percent), and media (9 percent),
while the non-family corporations were into utilities (34 percent), transportation (24 percent),
and education (11 percent).

Measures
Aside from leadership and innovation culture, mediating variables used for the study were
communicating strategy for innovation, employee engagement and climate, support system
and structures, training and development for innovation, and evaluation and rewards.
Innovation culture. Innovation culture describes the organization’s willingness to try out
new ideas and openness to change. It was measured using a seven-item scale with
five alternatives (1: not at all; 5: exactly like) (α ¼ 0.80). Example of items included were:
“This organization is always experimenting with new ideas” and “This organization is very
responsive and changes easily.”
Role modeling and leadership support for innovation. This variable reflects the perception
that leaders are innovative, and that they encourage others to be innovative, as well.
 LODJ It was measured using a six-item scale with five alternatives (1: not at all; 5: exactly like)
(α ¼ 0.78). Example of items included are “Our leaders are open to employee questions,
opinions and suggestions” and “Employees are not penalized when they take risks or try
something new.”

Mediating variables
Communicating strategy for innovation. This pertains to the extent that creativity and
innovation are articulated as company values and are explicitly stated as organization
goals. A five-point scale was used to measure this four-item variable (1: not at all; 5: exactly
like) (α ¼ 0.92). Sample items included were “Creativity/innovation is in our vision/mission
statement” and “Creativity/innovation is part of our business strategy.”
Employee engagement and climate. This variable depicts an environment wherein
employees work collaboratively, and where employees go the extra mile in their work. It was
measured using a 17-item scale with five alternatives (1: not at all; 5: exactly like) (α ¼ 0.93).
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Example of items include: “There is a good relationship between management and

employees” and “It is easy to get the cooperation of other departments in this organization.”
Support system and structures. Support system and structures pertains to the
organization policies, processes, and the physical environment that reinforces innovation.
It was measured using a 14-item scale with five alternatives (1: not at all; 5: exactly like)
(α ¼ 0.85). Example of items include: “We deliberately recruit creative/innovative people”
and “Our work environment is colorful.”
Training and development for innovation. This variable pertains to having learning and
development initiatives in the organization that support innovation. It was measured using
a four-item scale with five alternatives (1: not at all; 5: exactly like) (α ¼ 0.92). Example of
items include: “Our company provides adequate programs to develop our technical skills”
and “Our company provides adequate programs for our personal development.”
Evaluation and rewards. This variable depicts how innovation is encouraged in the
organization through the provision of resources and rewards. Some items were
“Our company allows us the time to develop new ideas” and “My boss praises me when I
try and innovate in my job.” It was measured using a seven-item scale with five alternatives
(1: not at all; 5: exactly like) (α ¼ 0.93).

Results
Correlations
Before running mediation analyses, Pearson rs were computed to check if there was
multicollinearity among the variables. As seen in Table I, the variables were mostly
moderately related to each other (r ¼ 0.43 to r ¼ 0.69), while management of innovation and
support system and structures were strongly related to each other (r ¼ 0.79). Also, means for
the entire sample (M ¼ 3.35–3.71) on all the variables indicate that respondents perceive that
the statements somewhat describe their companies.

Differences in innovation culture and its antecedents by ownership type

As shown in Table II, the means of all variables for non-family-owned corporations were
higher than those for sole proprietorships and family-owned corporations. Non-family-
owned corporations had significantly higher means than sole proprietorships and family-
owned corporations in innovation culture (M ¼ 3.50, SD ¼ 0.66; t(629), p ¼ 0.000), role
modeling and leadership support (M ¼ 3.61, SD ¼ 0.75; t(629), p ¼ 0.003), communicating
strategy for innovation (M ¼ 3.76, SD ¼ 0.85; t(629), p ¼ 0.000), support systems and
structures (M ¼ 3.26, SD ¼ 0.47; t(629), p ¼ 0.002), and evaluation and rewards (M ¼ 3.58,
SD ¼ 0.83; t(629), p ¼ 0.001).
 Overall Overall
Ownership and
α M SD IC RLS CSI EEC SSS TDI ER leadership
Innovation culture (IC) 0.80 3.35 0.71 1
Role modeling and leadership
support for innovation (RLS) 0.78 3.54 0.74 0.64** 1
Communicating strategy for
innovation (CSI) 0.92 3.61 0.89 0.57** 0.58** 1
Employee engagement and
climate (EEC) 0.93 3.71 0.61 0.63* 0.66** 0.47** 1
Support systems and
structures (SSS) 0.85 3.22 0.48 0.67** 0.68** 0.55** 0.67** 1
Table I.
Training and development for Reliability, overall
innovation (TDI) 0.92 3.53 0.90 0.50** 0.49** 0.43** 0.60** 0.66** 1 means, standard
Evaluation and rewards (ER) 0.93 3.49 0.86 0.68** 0.67** 0.60** 0.68** 0.79** 0.69** 1 deviations, and
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Notes: *,**Correlations significant at p o0.05 and p o0.01 (two-tailed), respectively correlations

Sole proprietorship and family- Non-family-owned

owned corporations corporations
M SD M SD t-test

Innovation culture (IC) 3.13 0.74 3.50 0.66 −6.68**

Role modeling and leadership support for
innovation (RLS) 3.43 0.72 3.61 0.75 −3.00**
Communicating strategy for innovation (CSI) 3.37 0.91 3.76 0.85 −5.33**
Employee engagement and climate (EEC) 3.68 0.63 3.73 0.59 −0.89
Table II.
Support systems and structures (SSS) 3.14 0.49 3.26 0.47 −3.06** Means, standard
Training and development for innovation (TDI) 3.48 0.89 3.57 0.91 −1.24 deviations and test
Evaluation and rewards (ER) 3.34 0.87 3.58 0.83 −3.37** of differences per
Note: **Correlation significant at po 0.01 (two-tailed) ownership type

Mediation analyses: total sample

As Hughes et al. (2018) suggest, leadership may influence innovation through mediating
variables. Thus, we hypothesized that leadership affects perceived innovation through
intervening variables specified in the CREATE model: communicating strategy for
innovation, employee engagement and climate, support system and structures, training and
development for innovation, and evaluation and rewards. The macro, PROCESS (Model 4),
was used to provide estimates for the direct of X on Y and indirect effects of X on Y through M
(Hayes, 2013). Instead of separate simple mediation analyses per mediating variable, a parallel
multiple mediator model was tested to look at the simultaneous impact of the variables.
Furthermore, bootstrapping analyses were conducted to determine the significance of the
indirect relations (Preacher and Hayes, 2008). Bias-corrected 95% confidence intervals were
used with a bootstrap method with k ¼ 5,000 iterations for the indirect effects.
For the total sample, Figure 2 shows that the hypothesis where role modeling and
leadership support directly impacts innovation culture was supported (b ¼ 0.15, SE ¼ 0.04,
and CI 95%: 0.07–0.22). The hypothesis that role modeling and leadership support impact
innovation culture indirectly through mediating variables was also mostly supported.
There were significant indirect effects through communicating strategy for innovation,
estimated as a1b1 ¼ (0.69) (0.14) ¼ 0.095 with a 95% biased-corrected bootstrap interval of
0.09–0.19; through employee engagement and climate, estimated as a2b2 ¼ (0.55)
(0.22) ¼ 0.12 with a 95% biased-corrected bootstrap interval of 0.13–0.32; through support
 LODJ
(1) Communicating b1 = 0.14*
Ownership a1 = 0.69*
Strategy for (0.03)
(0.04)
Innovation

a2 = 0.55* (2) Employee b2 = 0.22*

(0.03) Engagement (0.05)
and Climate
Role Modeling
and Leadership c’ = 0.15* (0.04) Innovation
Support for culture
Innovation a3 = 0.44* b3 = 0.30*
(0.02) (0.07)

(3) Support System

and Structures
a4 = 0.59* b4 = –0.04 ns
(0.04) (0.03)
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(4) Training and

Development
a5 = 0.77* for Innovation b5 = 0.18*
Figure 2. (0.03) (0.04)
Direct and indirect
effects of role
modeling and (5) Evaluation and
leadership support on Rewards
innovation culture for
total sample
Notes: *,**Correlations significant at p < 0.05 and p < 0.01 (two-tailed), respectively

system and structures, estimated as a3b3 ¼ (0.44) (0.30) ¼ 0.13 with a 95% biased-corrected
bootstrap interval of 0.16–0.44; and through evaluation and rewards, estimated as
a5b5 ¼ (0.77) (0.18) ¼ 0.14 with a 95% biased-corrected bootstrap interval of 0.09–0.26.
However, role modeling and leadership support had no indirect effect to innovation culture
via training and development for innovation.

Mediation analyses by ownership type

To test the applicability of the model by type of ownership structure, parallel mediation
analysis was conducted separately for the two types of organizations. As can be seen from the
separate parallel mediation analyses for the sole proprietorship and family-owned corporation
ownership type and the non-family corporation ownership type (Figures 3 and 4), the
hypothesis that role modeling and leadership support directly impacts innovation culture for
both ownership types was partially supported. Leadership directly impacts innovation culture
in non-family corporations (b ¼ 0.21, SE ¼ 0.05, and CI 95%: 0.11–0.30), but not in sole
proprietorship and family-owned corporations.
The hypothesis that role modeling and leadership support impacts innovation culture
indirectly through mediating variables in sole proprietorship and family-owned corporation,
and non-family corporation ownership types was also partially supported. For the sole
proprietorship and family-owned corporation ownership type, there were significant
indirect effects through communicating strategy for innovation, estimated as a1b1 ¼ (0.73)
(0.14) ¼ 0.10 with a 95% biased-corrected bootstrap interval of 0.04–0.17; through
employee engagement and climate, estimated as a2b2 ¼ (0.54) (0.39) ¼ 0.21 with a 95%
biased-corrected bootstrap interval of 0.13–0.30; through support system and structures,
estimated as a3b3 ¼ (0.47) (0.49) ¼ 0.23 with a 95% biased-corrected bootstrap interval of
0.12–0.35; through training and development for innovation, estimated as a4b4 ¼ (0.55)
(−0.13) ¼ −0.07 with a 95% biased-corrected bootstrap interval of −0.15 to −0.02; and
 Sole proprietorship Ownership and
a1 = 0.73* (1) Communicating
and Family-owned
corporations (0.07) Strategy for
b1 = 0.14*
(0.04) leadership
Innovation

a2 = 0.54* b2 = 0.39*
(2) Employee
(0.04) (0.07)
Engagement
and Climate
Role Modeling
and Leadership c’ = 0.055 ns (0.07) Innovation
Support for culture
Innovation a3 = 0.47* b3 = 0.49*
(0.03) (0.11)

(3) Support System

and Structures
a4 = 0.55* b4 = –0.13*
(0.07) (0.05)
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(4) Training and

Development
Figure 3.
a5 = 0.75* for Innovation b5 = 0.14* Direct and indirect
(0.06) (0.06) effects of role
modeling and
leadership support on
(5) Evaluation and innovation culture in
Rewards sole proprietorship
and family-owned
corporations
Notes: *,**Correlations significant at p < 0.05 and p < 0.01 (two-tailed), respectively

Non-family a1 = 0.64* (1) Communicating b1 = 0.10*

corporations (0.05) Strategy for (0.04)
Innovation

a2=0.55* (2) Employee b2 = 0.09 ns

(0.03) Engagement (0.06)
and Climate
Role Modeling
and Leadership c’=0.21* (0.05) Innovation
Support for culture
Innovation a3 = 0.42* b3 = 0.11 ns
(0.02) (0.08)
(3) Support System
and
Structures
a4 = 0.62* b4 = 0.07 ns
(0.05) (0.04)

(4) Training and

Development
a5 = 0.77* for Innovation b5 = 0.20* Figure 4.
(0.04) (0.05) Direct and indirect
effects of role
modeling and
(5) Evaluation and leadership support on
Rewards innovation culture in
non-family
corporations
Notes: *,**Correlations significant at p < 0.05 and p < 0.01 (two-tailed), respectively
 LODJ through evaluation and rewards, estimated as a5b5 ¼ (0.75) (0.14) ¼ 0.11 with a 95% biased-
corrected bootstrap interval of 0.02–0.20.
For non-family corporations, only two significant indirect relationships were found.
Significant indirect effects of leadership on innovation culture were seen for communicating
strategy for innovation, estimated as a1b1 ¼ (0.64) (0.10) ¼ 0.06 with a 95% biased-corrected
bootstrap interval of 0.01–0.12, and through evaluation and rewards, estimated as
a5b5 ¼ (0.77) (0.20) ¼ 0.15 with a 95% biased-corrected bootstrap interval of 0.07–0.25.
Finally, the hypothesis that there are differences between sole proprietorship and family-
owned corporations and non-family corporations in terms of the direct and indirect effects of
role modeling and leadership support on innovation culture was supported. As seen from
the previous results, role modeling and leadership support had a direct effect on innovation
culture for non-family corporations but was non-significant for sole proprietorship and
family-owned corporations. In addition, only three indirect effects were seen for non-family
corporations; whereas, it seems that in sole proprietorship and family-owned corporations,
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mediating variables fully mediate the relationship between role modeling and leadership
support and innovation culture.

Discussion and conclusions

Total model
Across the various types of ownership, there was partial support for the mediation model.
First leadership directly impacts innovation. Second, it appears that innovation culture is
established when a leader role models and supports innovation by communicating the
vision for innovation, encouraging employees to innovate, providing the systems and
structures to enable innovation, and evaluating and rewarding innovation efforts. However,
not all the variables, particularly training and development, were significant mediators.
Perhaps this is because training and development is correlated with other variables such as
systems and structures, evaluation and rewards, etc. Also, this result may indicate the need
to improve and provide more resources to training and development initiatives that target
innovation. Thus, this finding suggests that organizations and their leaders need to create
the conditions for individuals to apply their innovation knowledge and skills.

Differences in antecedents by ownership type

The resulting models support the idea that there are differences in the impact of leadership
on innovation culture depending on ownership type. For sole proprietorships and family-
owned corporations, it appears that intervening variables fully mediate the effect of
leadership on building an innovation culture, and leadership role modeling and support did
not directly impact innovation culture. Perhaps this is because in sole proprietorships and
family-owned corporations, leaders have full control over the organization and the
development of the mechanisms that would encourage and build an innovative culture.
In contrast, for the non-family corporations, leadership had a direct relationship on
innovation culture. In addition, leadership role modeling and support for innovation only
indirectly influenced innovation through communicating an innovation strategy and
evaluation and rewards. These findings might be due to the fact that corporations are run
by professional managers and leadership may have less to do with legitimate control and
power and more with role modeling and influencing. Thus, leaders in these organizations
may be more concerned in developing their organization’s innovation strategy and
managing innovation in their organizations.

Applicability of model by ownership type

The differences in the antecedents of innovation between sole proprietorships and family-
owned corporations, and non-family corporations suggest that the application of CREATE
 model to organizations may need to be nuanced by ownership. Specifically, leaders of sole Ownership and
proprietorships and family-owned corporations would influence innovation in their leadership
organizations by communicating the strategy for innovation, engaging their employees to
innovate, putting in the systems and structures, emphasizing the development of innovation
skills among employees, and putting premium in evaluating and rewarding innovation
efforts. For non-family corporations, on the other hand, leaders themselves seem to need to
embody an innovation mindset, as this characteristic has been seen to directly impact
innovation. This penchant for innovation should be communicated by the leader throughout
the organization. The leaders should also emphasize that innovation efforts would be
evaluated and eventually rewarded.

Limitations and future research

This study contributed to the research in innovation by linking leadership and building an
innovation culture, and comparing how these relationships may occur based on
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organization ownership. Nevertheless, the findings of this study might be limited because
of the cross-sectional nature of the data. More robust conclusions may be drawn from
longitudinal research where it can capture how innovation in businesses happens over time.
In addition, the study only examines the role of ownership structure on innovation
culture and its antecedents. Other studies may wish to examine other mediating or
moderating variables such as entrepreneurship orientation. It might be interesting to see
how the entrepreneurship orientation of leaders also mediates building an innovation
culture. Another avenue for further research is to include risk-taking as one of the elements
in the CREATE framework, especially since managerial risk-taking has been seen to
directly and indirectly impact innovation performance through a risk-taking climate
(García-Granero et al., 2015). There is also an indication that, in terms of ownership,
managers who are part-owners and are risk-averse cut down on innovation spending and
eventually spell their organizations’ decline (Latham and Braun, 2009).
Limitations notwithstanding, the study has shown that the culture-building model,
CREATE, can be used as a framework for building an innovation culture in organizations.
The model shows that a leadership variable, role modeling and support for innovation,
predicts mediating variables, which impacts innovation. The study also showed that leaders
among sole proprietorships, family-owned corporations, and non-family corporations may
need to employ different approaches in building an innovation culture in their organizations.

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Corresponding author
Vanessa C. Villaluz can be contacted at: vvillaluz@ateneo.edu

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