essay on creativity and innovation leads to global business growth

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How Innovation Drives Economic Growth

Three Stanford scholars explore how we measure innovation, how innovation drives productivity, and how productivity affects inequality.

June 24, 2019

How do you measure innovation, and how does it impact the economy? Three Stanford scholars discussed those questions and more during a recent panel discussion. | Reuters/Jason Lee

In 1500, China’s economy was the strongest in the world. But by the 19th century, the U.S., Western Europe, and Japan had leapfrogged over China by churning out goods and services in vast quantities while the former superpower stalled.

Why? Some economists argue that China’s lack of free markets and unencumbered innovation in the West led to the shift. But what is the relationship between innovation and markets, productivity, and inequality?

The answer to that puzzle and others were explored during a recent forum on the relationship of innovation to economic growth at the Hoover Institution. Three Stanford professors, all Hoover fellows — Stephen Haber , Edward Lazear , and Amit Seru — spoke on a panel moderated by Jonathan Levin , dean of Stanford Graduate School of Business.

The panelists offered thoughts on how innovation is measured, the role of markets, and what types of firms are likely to innovate. They examined how productivity affects wages, skills, and social inequality, and considered what kind of policies might ensure that the pace of innovation remains brisk.

How Do You Measure Innovation?

Like art, everyone knows innovation when they see it, but defining and measuring it, says Amit Seru, “is a holy grail” for researchers. Studying patents might be key to answering that question.

Seru and his colleagues used big data techniques to analyze 9 million U.S. patents filed over two centuries. Although the Silicon Valley ethos holds that startups are the wellspring of innovation, the researchers found that established firms were also very innovative, as measured by high-quality patenting activity. They also concluded that both private and public firms contributed to innovation and that universities and some government entities were also quite innovative.

The first step in that analysis was to construct a measure of high-quality innovation. The researchers did so by comparing the texts of all the patents in the database and tabulating the occurrence of important words. If there was little overlap between the text of a patent and its predecessors, the patent was likely a novel innovation. If words in subsequent patents were similar, the subject patent was likely an important innovation that other patents had built upon. Patents meeting both criteria, i.e., novel and important, were considered “high quality,” says Seru, a Stanford GSB professor of finance. As a check, the researchers compared their list of high-quality patents to those already deemed significant by economic historians. The two lists were quite similar, they found. Using this measure of high-quality innovation, the researchers examined which entities contributed to breakthrough innovations over time and what patterns were consistently associated with these events.

Quote If there is a threat to prosperity, it comes from people who believe they are doing good by using the power of the state to decide which innovations are just and which are unjust. Attribution Stephen Haber

“What is consistent is the notion of creative destruction” and the rational reallocation of resources around such events, Seru says. When firms innovate, profits go up, and labor and financing flow to them and away from their competitors, who suffer from this creative destruction. For this to occur, labor and capital markets need to function efficiently. While creative destruction and associated patterns are not a new notion, what is different today is that innovation might occur across different entities — such as government as well as public or private firms — and inventors working across geographic boundaries. Innovation remains brisk, but if markets in the U.S., which have functioned efficiently for centuries, are hindered, innovation could falter, Seru argues.

What Happened to China?

Like Seru, Stephen Haber and his colleagues used big data to analyze economic growth. To build their geographical representation of economically powerful regions, they geocoded every major city in the world and, using a variety of sources, researched the level of economic activity at 100-year intervals. The study took three years.

During the period when China was economically more advanced than the West, it traded goods like spices, silk, and tea for silver. At the time, the West had little else that the Chinese needed, Haber says. But that changed, and by 1800 the West had pulled ahead. Innovation made the difference — modern chemistry, steam power applied to transportation, and interchangeable parts — but not just innovations in technology. Modern economic growth also came from organizational innovations in the military, transportation, and the legal and financial worlds, Haber says.

One major example: the concept of the patent as a tradable property right.

“Places where people were free to experiment, to simultaneously compete and cooperate through a market where no one was in charge of deciding which technologies would be adopted, which would be rejected, and which would be forbidden, flourished,” Haber says.

Historically, China took the opposite approach: The state wielded the power to reject certain technologies. For example, the development of railroads was drastically slowed by China’s emperor because he feared their spread would undo the agrarian society and threaten his rule, Haber says.

That lesson, he says, should not be lost on today’s leaders. “If there is a threat to prosperity, it comes from people who believe they are doing good by using the power of the state to decide which innovations are just and which are unjust.”

How Are Productivity and Inequality Linked?

There are two ways to achieve economic growth: Add population or make people more productive, says Edward Lazear, a professor of economics at Stanford GSB. Economic growth in the 20th century was tremendous. The standard of living doubled every 33 years, but that made a challenging target for the 21st century. Slower population growth and aging of the current population imply that we will need productivity increases to do more of the work in the future.

Productivity feeds into wage growth, but as productivity has slowed in recent years, so have wages, Lazear says. In the late 1990s, productivity grew by about 3% a year; now it’s only about one-third of that. So it’s no surprise that wages have also been flat. But the pain of flat wages is not shared equally throughout the population.

The productivity — and wages — of highly educated workers has soared over the last 30 years. But the opposite is true for less educated segments of the population.

Making matters worse, the industries that have grown are the ones that employ highly educated workers, while the industries that have shrunk are the ones employing people with less education.

However, artificial intelligence and other technologies are not to blame and will not put everyone out of work, Lazear says. As measured by participation in the labor force, jobs as a whole don’t disappear when new technologies change the nature of work. There was never a transformation as radical as the Industrial Revolution, he notes, yet the labor force grew.

“The concern is not that people won’t be working. The concern is that they will work in crummy jobs,” Lazear says. To alleviate the problem, it will be necessary to rethink education and job training. The key, Lazear says, is this: “Lower the skills gap.”

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The brain gain: the impact of immigration on american innovation, to discover breakthrough ideas, look to the outsiders, how to survive the a.i. revolution, editor’s picks.

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Innovation in Business: What It Is & Why It’s Important

• 08 Mar 2022

Today’s competitive landscape heavily relies on innovation. Business leaders must constantly look for new ways to innovate because you can't solve many problems with old solutions.

Innovation is critical across all industries; however, it's important to avoid using it as a buzzword and instead take time to thoroughly understand the innovation process.

Here's an overview of innovation in business, why it's important, and how you can encourage it in the workplace.

What Is Innovation?

Innovation and creativity are often used synonymously. While similar, they're not the same. Using creativity in business is important because it fosters unique ideas . This novelty is a key component of innovation.

For an idea to be innovative, it must also be useful. Creative ideas don't always lead to innovations because they don't necessarily produce viable solutions to problems.

Simply put: Innovation is a product, service, business model, or strategy that's both novel and useful. Innovations don't have to be major breakthroughs in technology or new business models; they can be as simple as upgrades to a company's customer service or features added to an existing product.

Access your free e-book today.

Types of Innovation

Innovation in business can be grouped into two categories : sustaining and disruptive.

• Sustaining innovation: Sustaining innovation enhances an organization's processes and technologies to improve its product line for an existing customer base. It's typically pursued by incumbent businesses that want to stay atop their market.
• Disruptive innovation: Disruptive innovation occurs when smaller companies challenge larger businesses. It can be classified into groups depending on the markets those businesses compete in. Low-end disruption refers to companies entering and claiming a segment at the bottom of an existing market, while new-market disruption denotes companies creating an additional market segment to serve a customer base the existing market doesn't reach.

The most successful companies incorporate both types of innovation into their business strategies. While maintaining an existing position in the market is important, pursuing growth is essential to being competitive. It also helps protect a business against other companies affecting its standing.

Learn about the differences between sustaining and disruptive innovation in the video below, and subscribe to our YouTube channel for more explainer content!

The Importance of Innovation

Unforeseen challenges are inevitable in business. Innovation can help you stay ahead of the curve and grow your company in the process. Here are three reasons innovation is crucial for your business:

• It allows adaptability: The recent COVID-19 pandemic disrupted business on a monumental scale. Routine operations were rendered obsolete over the course of a few months. Many businesses still sustain negative results from this world shift because they’ve stuck to the status quo. Innovation is often necessary for companies to adapt and overcome the challenges of change.
• It fosters growth: Stagnation can be extremely detrimental to your business. Achieving organizational and economic growth through innovation is key to staying afloat in today’s highly competitive world.
• It separates businesses from their competition: Most industries are populated with multiple competitors offering similar products or services. Innovation can distinguish your business from others.

Innovation & Design Thinking

Several tools encourage innovation in the workplace. For example, when a problem’s cause is difficult to pinpoint, you can turn to approaches like creative problem-solving . One of the best approaches to innovation is adopting a design thinking mentality.

Design thinking is a solutions-based, human-centric mindset. It's a practical way to strategize and design using insights from observations and research.

Four Phases of Innovation

Innovation's requirements for novelty and usefulness call for navigating between concrete and abstract thinking. Introducing structure to innovation can guide this process.

In the online course Design Thinking and Innovation , Harvard Business School Dean Srikant Datar teaches design thinking principles using a four-phase innovation framework : clarify, ideate, develop, and implement.

• Clarify: The first stage of the process is clarifying a problem. This involves conducting research to empathize with your target audience. The goal is to identify their key pain points and frame the problem in a way that allows you to solve it.
• Ideate: The ideation stage involves generating ideas to solve the problem identified during research. Ideation challenges assumptions and overcomes biases to produce innovative ideas.
• Develop: The development stage involves exploring solutions generated during ideation. It emphasizes rapid prototyping to answer questions about a solution's practicality and effectiveness.
• Implement: The final stage of the process is implementation. This stage involves communicating your developed idea to stakeholders to encourage its adoption.

Human-Centered Design

Innovation requires considering user needs. Design thinking promotes empathy by fostering human-centered design , which addresses explicit pain points and latent needs identified during innovation’s clarification stage.

There are three characteristics of human-centered design:

• Desirability: For a product or service to succeed, people must want it. Prosperous innovations are attractive to consumers and meet their needs.
• Feasibility: Innovative ideas won't go anywhere unless you have the resources to pursue them. You must consider whether ideas are possible given technological, economic, or regulatory barriers.
• Viability: Even if a design is desirable and feasible, it also needs to be sustainable. You must consistently produce or deliver designs over extended periods for them to be viable.

Consider these characteristics when problem-solving, as each is necessary for successful innovation.

The Operational and Innovative Worlds

Creativity and idea generation are vital to innovation, but you may encounter situations in which pursuing an idea isn't feasible. Such scenarios represent a conflict between the innovative and operational worlds.

The Operational World

The operational world reflects an organization's routine processes and procedures. Metrics and results are prioritized, and creativity isn't encouraged to the extent required for innovation. Endeavors that disrupt routine—such as risk-taking—are typically discouraged.

The Innovative World

The innovative world encourages creativity and experimentation. This side of business allows for open-endedly exploring ideas but tends to neglect the functional side.

Both worlds are necessary for innovation, as creativity must be grounded in reality. You should strive to balance them to produce human-centered solutions. Design thinking strikes this balance by guiding you between the concrete and abstract.

Learning the Ropes of Innovation

Innovation is easier said than done. It often requires you to collaborate with others, overcome resistance from stakeholders, and invest valuable time and resources into generating solutions. It can also be highly discouraging because many ideas generated during ideation may not go anywhere. But the end result can make the difference between your organization's success or failure.

The good news is that innovation can be learned. If you're interested in more effectively innovating, consider taking an online innovation course. Receiving practical guidance can increase your skills and teach you how to approach problem-solving with a human-centered mentality.

Eager to learn more about innovation? Explore Design Thinking and Innovation ,one of our online entrepreneurship and innovation courses. If you're not sure which course is the right fit, download our free course flowchart to determine which best aligns with your goals.

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Importance of Creativity & Innovation in Entrepreneurship 2024

If entrepreneurs all did business in the same way, in the same industries, in the same marketplace, and with the same products and services, nobody would stand out with a competitive advantage and many businesses would not be in business for very long.

Carving out a niche for yourself as an entrepreneur, or making sure that your Unique Selling Proposition (USPs) helps differentiate your business to make it stand out from the clutter, you need to implement high levels of creativity and innovation into all of your entrepreneurial practices. Innovation and entrepreneurship, and more specifically, cultivating creativity in entrepreneurship is an important process which helps entrepreneurs generate value, useful unique products, services, ideas, procedures, or new business processes. 

Role Of Creativity and Innovation In Entrepreneurship

According to Atlantis Press , creativity and innovation helps develop new ways of improving an existing product or service to optimize the business. Successful innovation is the driving force that allows entrepreneurs to think outside the box and beyond the traditional solutions. Through this opportunity new, interesting, potential yet versatile ideas come up.

Overall, creativity and innovation are integral to entrepreneurial success. They empower entrepreneurs to discover opportunities, solve problems, differentiate themselves, adapt to change, continuously improve, and drive business growth. By embracing creativity and fostering an innovative mindset, entrepreneurs can build successful ventures in an ever-evolving business landscape.

Entrepreneurs and creativity

Creativity is an indispensable trait for entrepreneurs. It drives idea generation, opportunity recognition, problem-solving, innovation, and differentiation. Creative entrepreneurs embrace risk, communicate effectively, and continually learn and adapt. By harnessing their creativity, entrepreneurs can navigate challenges, seize opportunities, create new solutions and build successful and impactful ventures.

But creativity does not only assist entrepreneurs in the initial stages of coming up with a business idea. Creativity will also be a driving force and also highly valuable in terms of:

Coming up with branding and marketing ideas

Creative ideas for blogs, other SEO-related content

Finding creative solutions to everyday business problems

Fun and exciting social media strategies

A good balance of linear and lateral thinking

Entrepreneurs and Innovation

Entrepreneurs and innovation go hand in hand. Innovation is a key driver of entrepreneurial success, and entrepreneurs play a critical role in bringing innovative ideas to life. They adapt to change, solve problems, and fuel business growth through innovation. By embracing innovation, entrepreneurs can create disruptive solutions, differentiate themselves in the market, and ultimately achieve entrepreneurial success.

Having a good hold on innovation and as a net result, innovative ideas, is very important for entrepreneurs. Not only will an innovative mindset be advantageous in coming up with products, services, and business ideas, it will also be exceptionally helpful when it comes to adapting to change and finding new and improved ways of doing things in your business structure.

Do you have the skills to be a successful entrepreneur?

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Benefits of using creativity for innovation

For decades, advertising and marketing companies have used creativity to differentiate innovative products and services being advertised against other like products in the marketplace. Using creativity for innovation can lead you to be a better entrepreneur and infusing creativity into your business makes you an innovative leader within your industry. Without creativity, businesses run the risk of slipping into the clutter that may exist in an industry.

To improve your chances of successful entrepreneurship, here are some of the benefits of being a creative and innovative entrepreneur:

You will be able to create new products or services that solve problems for people

You will be able to improve processes and make them more efficient

You will be able to find new markets for existing products or services

You will be able to create new jobs

You will be able to make a positive impact on society

You will be able to have a lot of fun and satisfaction in what you do

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And if you're interested in pursuing entrepreneurship further, here at Nexford University , why not consider our excellent selection of BBA , MBA and MS degrees , including our BBA in Entrepreneurship and our MS in Entrepreneurship .

Examples of Entrepreneurial Creativity and Innovation

Apple (steve jobs).

He may have passed away on the 5th of October 2011, but the creative entrepreneurial legacy that Steve Jobs left behind will have a marked impact on all other intrepid tech entrepreneurs that come after him. 

Steve Jobs had a never say die attitude and an incredible flair when it came to producing products that were leagues ahead of the competition and so creative that they stood head and shoulders above the competition. 

Apple Computer, Inc. was founded on April 1, 1976, by college dropouts Steve Jobs and Steve Wozniak, who brought to the new company a vision of changing the way people viewed computers. Jobs and Wozniak wanted to make computers small enough for people to have them in their homes or offices. And they succeeded beyond their wildest imagination.

Entrepreneur magazine says that Steve Jobs systematically cultivated his creativity and so can others. While there's no doubt that Jobs had a naturally creative brain, thanks to modern research, we can see that Jobs' artistry was also due to practices every entrepreneur can adopt to enhance creative thinking.

Jobs' meditation practice helped him develop creativity. Meditative practices, such as "open-monitoring training," encourage divergent thinking, a process of allowing the generation of many new ideas, which is a key part of creative innovation.

Other forces of creative entrepreneurial thinking

Steve Jobs most certainly did not have the monopoly when it came to creative entrepreneurial thinking. Far from it. Many other top creative entrepreneurs came before him, and right now the next wave of creative entrepreneurs are starting to make their mark. Household names such as Richard Branson, Bill Gates, Jeff Bezos, and Elon Musk have set the bar very high when it comes to creative thinking, allowing them to build multi-billion dollar empires.

Now whilst they may have had one thing in common which was having a knack for creative thinking, the one thing that leading entrepreneurs and innovators like Bill Gates and J.K. Rowling all have one thing in common and that is that they were all domain experts before launching their businesses. Bill Gates, spent nearly 10 years in school programming in different computer systems before starting Microsoft, whilst J.K. Rowling began writing at the age of six, and spent over seven years refining and perfecting her idea before it became a global sensation and boosted her net worth to over $1 billion.

Conclusion  

Whilst people maintain that you are born with creativity and an entrepreneurial flair, others maintain that it can be taught. You may have a great idea, but you’ll need business acumen to turn your idea into a successful, sustainable enterprise. Business degrees give you the space and time to hone these critical skills in a safe environment. A good one will give you opportunities to work on real-life projects or go on placements with industry leaders before launching out on your own. And once you're ready to go solo, you'll have already built an important network of connections and highly creative ways of thinking in an effective way.

If you are looking to up your understanding of business, improve your levels of creativity and promote entrepreneurship when it comes to the branding and running of a business, you might want to consider a university that offers  business degrees that involve learning how to be creative and effective in business using real life case studies. 

Nexford is just such a university. Expand your entrepreneurial skill set with an online BBA , MBA and MS degrees , including our BBA in Entrepreneurship and our MS in Entrepreneurship .

For a more in-depth analysis  download our free report .

Is innovation and creativity key to entrepreneurial success?

Yes, innovation and creativity are key to entrepreneurial success. They are essential elements that drive the growth and sustainability of entrepreneurial ventures. Innovation and creativity are vital for entrepreneurial success. They enable entrepreneurs to differentiate themselves, respond to market changes, solve problems, drive growth, take risks, attract stakeholders, and foster a culture of continuous improvement. 

Now whilst there have been many business ideas that were a stroke of genius, or people being in the right place at the right time, it is undeniable that the difference between business success and abject failure is the use of creativity in coming up with a concept and getting it noticed. Not always is it a case of 'if you build it they will come.' It's all about being innovative and never taking no for an answer.

Applied to business, innovation comprises several key elements, including a challenge   (to provoke it), creativity   (to spark it), contemplation   (to come up with an idea), focus on the customers (to sharpen the idea), and communication and cooperation   to facilitate the whole process.

How does creativity and innovation work together? 

Creativity provides the foundation of new and unique ideas, while innovation is the process of transforming those ideas into tangible outcomes. They work together to generate solutions, improve offerings, take risks, and differentiate in the market. By leveraging both creativity and innovation, entrepreneurs can foster a culture of continuous improvement and drive entrepreneurial success.

Whilst experts say that you are born with an innate sense of creativity and innovation, many others say that there are ways to encourage creativity and innovation. Don't be afraid to take risks and always maintain an open mind.

What is the purpose of innovation in business? 

The purpose of innovation in business is to differentiate, meet customer needs, gain a competitive advantage, drive growth, improve operational efficiency, adapt to change, and promote sustainable development. By embracing innovation, businesses can remain relevant, creative, thrive in a dynamic marketplace, and create long-term value for customers and stakeholders.

Creativity and innovation in organizations allows for adaptability, separates a business from its competitors, and fosters growth.  

How can you encourage innovation and creativity in the workplace?

Encouraging innovation and creativity in the workplace is crucial for fostering a culture of continuous improvement and driving business success. Here are some ways you can promote an innovative environment in your business with a proven methodology that combines theory and practice:

1. Make innovation a core value

2. Hire people with different perspectives

3. Give employees time and space to innovate

4. Encourage collaboration

5. Have a feedback process

6. Reward employees for great ideas

What strategies can leadership use to enhance creativity and innovation for employees

The importance of creativity and innovation can't be stressed enough and both play a major role in entrepreneurship. The link between creativity and successful businesses is proven. Kelly Personnel maintains that there are four strategies to enhance your team's creativity and improve organizational productivity.

1. Cultivate open communication 

Cultivating open communication in the workplace is essential for creating an environment where ideas can freely flow, collaboration can thrive, and innovation can flourish. There are many strategies to cultivate open communication which include; establishing a foundation of trust, encourage active listening, promoting two-way communication, fostering an open-door policy, embracing diverse perspectives, using clear and transparent communication channels, providing communication skills training, and leading by example.

2. Facilitate diverse ways of working

Facilitating diverse ways of working can greatly enhance creativity and innovation within an organization. By embracing diverse ways of working, organizations can tap into the collective creativity and innovation potential of their workforce. It encourages fresh perspectives, drives collaboration, and opens up new possibilities for problem-solving and growth.

3. Intentionally change things up

Intentionally changing things up in the workplace can have a positive impact on creativity and innovation. By intentionally changing things up, organizations can stimulate creativity and foster a culture of innovation. Embracing variety, providing opportunities for cross-pollination, and encouraging experimentation all contribute to an environment where new ideas can flourish, leading to breakthrough innovations and improved problem-solving.

4. Hold guided brainstorm sessions

Holding guided brainstorming sessions can be an effective way to enhance creativity and innovation in the workplace. By conducting guided brainstorming sessions, organizations can tap into the collective creativity and generate innovative ideas. These sessions provide a structured framework for idea generation, encourage collaboration, and inspire employees to think outside the box.

Looking to Improve your Skills as an Entrepreneur?

Mark is a college graduate with Honours in Copywriting. He is the Content Marketing Manager at Nexford, creating engaging, thought-provoking, and action-oriented content.

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The Role of Innovation and Entrepreneurship in Economic Growth

Michael Andrews, Aaron Chatterji, Josh Lerner, and Scott Stern, editors

We live in an era in which innovation and entrepreneurship seem ubiquitous, particularly in regions like Silicon Valley, Boston, and Research Triangle Park. But many metrics of economic growth, such as productivity growth and business dynamism, have been at best modest in recent years. The resolution of this apparent paradox can be found in dramatic heterogeneity across sectors, with some industries experiencing robust innovation and entrepreneurship and others stagnation.

By construction, the impact of innovation and entrepreneurship on overall economic performance is the cumulative impact of their effects on individual sectors. Understanding the potential for growth in the aggregate economy depends, therefore, on understanding the sector-by-sector potential for growth. This insight motivates the 12 studies of different sectors that are presented in this volume. Each study identifies specific productivity improvements enabled by innovation and entrepreneurship, for example as a result of new production technologies, increased competition, or new organizational forms. The studies, along with three synthetic chapters, provide new insights on the sectoral patterns and concentration of contributions of innovation and entrepreneurship to economic growth.

https://press.uchicago.edu/ucp/books/book/chicago/R/bo151022289.html

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© 2023 National Bureau of Economic Research. Periodical content may be reproduced freely with appropriate attribution.

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Harnessing Imagination to Drive Innovation

• Martin Reeves

Six steps to systematize creative thinking — and ultimately drive growth.

The decay of rules-based trade means that companies can no longer find growth as easily by expanding to new locations, or expanding demand through low-cost single point sourcing. In this context, companies seeking growth must develop innovative offerings to expand demand. These offerings are, essentially, products of imagination — conceiving of and realizing new possibilities — a challenge that companies struggle with. In this article, the authors present a six step-cycle that is at the foundation of a corporate “imagination machine.”

Growth is critical to long-term value creation: Our analysis of the total shareholder return (TSR) of over 2,000 large companies reveals that over a five-year period more than half of it can be attributed to sales growth — with investor expectations, cost reductions, and changes in operating margin making up the rest. Over a 10-year horizon, nearly three-quarters of TSR are driven by sales growth.

• Martin Reeves is the chairman of Boston Consulting Group’s BCG Henderson Institute in San Francisco and a coauthor of The Imagination Machine (Harvard Business Review Press, 2021).
• AJ Adam Job is the director of the Strategy Lab at the BCG Henderson Institute.

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ORIGINAL RESEARCH article

Founders’ creativity, business model innovation, and business growth.

• School of Management, Jilin University, Changchun, China

Given the existing studies on the role of different founders’ personalities in the growth of new ventures, we take the digital technology start-ups as the research object and focus on the role of founders’ creativity. In this study, we assess the relationship between founders’ creativity and business growth. According to the framework of upper echelons theory, we propose several hypotheses. Based on the investigation of 153 new ventures in China’s transition economy, we find that: (1) founders’ creativity has a positive impact on the growth of enterprises; (2) business model innovation positively mediates the relationship between founders’ creativity and enterprise growth; (3) work experience is found to be a moderator of the relationship between founders’ creativity and business model innovation. The conclusion of our analysis not only helps to further deepen the research on the growth process of start-ups but also helps to further expand the important role of business model innovation and founders’ work experience in the growth of new firms.

Introduction

Business model innovation has received a lot of attention from scholars and is considered to be a key driver of new venture growth and sustainable competitive advantage. The study points out that the business model of enterprises is not static, especially in today’s international context of technological progress and rapid changes in market demand ( Onetti et al., 2012 ; Wu, 2021 ). In entrepreneurial practice, more and more enterprises rely on business model innovation. In entrepreneurial practice, more and more enterprises rely on business model innovation to obtain corporate performance. For example, the domestic retail giant Suning Corporation, driven by Internet technology, has broken through the business model of traditional retail services, integrated into the e-commerce thinking, and gradually defined itself as “Suning Cloud Business,” leaving Gome Electrical Appliances in the same industry behind.

Some studies have pointed out that business model innovation is even more valuable than technological innovation to some extent ( Teece, 2010 ; Bhatti and Danilovic, 2018 ), because business models are an important bridge for transforming new technologies into economic value, and through business model innovation, they promote the efficient commercialization of technology, thus bringing about the rapid growth of enterprises ( Chesbrough, 2007 ). Especially in a dynamic environment, business model innovation helps companies cope with complex changes in external markets ( Smajlović et al., 2019 ). It is precisely because of the important value of business model innovation that more scholars focus on the factors that promote/hinder business model innovation ( Chesbrough, 2010 ; Bhatti and Danilovic, 2018 ; Snihur and Zott, 2020 ), such as the original value allocation mode of enterprises, technical conditions, leadership characteristics, and organizational changes, organizational learning ( Sosna et al., 2010 ; Koch et al., 2018 ), changes in the market environment, value networks ( Smajlović et al., 2019 ). Previous studies have mainly analyzed the role of organizational factors or external environmental factors on business model innovation. In recent years, scholars have gradually discovered that the founders of enterprises play a key role in the business model design process ( Smith et al., 2010 ; Svejenova et al., 2010 ). Although scholars have explored the role of entrepreneurs’ entrepreneurship, background characteristics, social capital, and behavior in business model design ( Bhatti et al., 2021 ; Zhao et al., 2021 ), the mechanism of how entrepreneurs’ characteristics influence business model innovation and lead to firm growth has been neglected.

To address this theoretical gap, this study focuses on the core characteristic of founders’ creativity. Existing research has found that the creativity of individuals (founders) contributes to the formation of entrepreneurial intentions ( Hu et al., 2018 ), opportunity identification, and enterprise development ( Dayan et al., 2013 ; Shane and Nicolaou, 2015 ; Farsi et al., 2019 ), business survival/growth ( Mambula and Sawyer, 2004 ; Zhang et al., 2018 ), new product development ( Im and Workman, 2004 ; Castillo-Vergara and Garcia-Perez-de-Lema, 2021 ). There is a lack of research on the impact of creativity on firm growth from the perspective of business model innovation. According to the Upper Echelons theory, top managers will give personalized explanations of the situation they face, thus making strategic decisions that lead to the growth of the enterprise ( Hambrick and Mason, 1984 ). Therefore, this study has important theoretical value and attempts to solve the following two key problems through large-scale questionnaire surveys and empirical analysis: (1) how founders’ creativity and business model innovation affect enterprise growth, (2) the mediating role of business model innovation in the process of founders’ creativity affecting enterprise growth.

As mentioned above, founder creativity provides the premise for business model innovation and makes the team have more basis and willingness for innovation. However, the founder’s experience is also crucial to innovation decisions. Work experience usually refers to the experience that entrepreneurs have accumulated in their previous work fields, including knowledge of finance, marketing, management, etc. ( Shane, 2001 ). The high level of work experience reflects that founders are better at seizing market opportunities and taking advantage of market conditions, and can identify more valuable opportunities for innovation and increase the possibility of innovative business models. Therefore, this study further explores the moderating effect of founders’ work experience on the relationship between their creativity and business model innovation.

In summary, we establish a novel framework for studying the impact of creativity on firm growth, with special attention to the mediating role of business model innovation and the moderating role of work experience. This study aims to make several contributions to the existing literature. First, this study contributes to the current literature by studying business model innovation as an intermediate process between SME creativity and firm growth. It also responds to Baron and Tang’s (2011) call to explore the mechanisms by which individual entrepreneurs encourage innovation at the firm level. Secondly, this study empirically examines the potential relationship between creativity and firm growth, thereby contributing to the literature on business model innovation by identifying the antecedents of business model innovation. Third, given the lack of research on boundary conditions of the relationship between entrepreneurial creativity and business model innovation, this study adds to the research on business model innovation by examining work experience as a moderator, which may promote or limit the impact of creativity on business model innovation.

Theoretical Background and Hypotheses

Founders’ creativity.

Creativity is considered by scholars to be a common trait possessed by successful founders ( Pretorius et al., 2005 ) that helps inspire founders to generate new ideas and turn the idea into business opportunities to be exploited ( Gielnik et al., 2012 ). Creativity is a complex and important business asset ( De Miranda et al., 2009 ), helping founders cope with dilemmas such as a fiercely competitive environment, a changing market, and new technology needs. Creativity drives innovative activities in business and is considered a significant source of innovative activities to promote the development of new products/services, and organizational innovation ( Cook, 1998 ; Heye, 2006 ).

As an individual-level concept, Perry-Smith (2006) defines creativity as an individual’s ability to generate novel ideas, new products, and solutions. Munizu and Hamid (2018) studied founders as the object of study, believing that creativity is a key skill possessed by founders. Creativity is an important source of innovation that drives the development of new businesses and new products/services. Research by Ahlin et al. (2014) argues that creativity is a personal trait that founders have. It shows that founders can often generate novel ideas and are good at using innovative ways to solve problems.

Founder creativity refers to personal traits that founders have. It shows that founders can often generate novel ideas and are good at using innovative ways to solve problems ( Ahlin et al., 2014 ). It is an innate trait of the founder. The founder’s cognitive style is an individual difference in the preferred way of organizing and processing information and experience ( Messick, 1996 ), which is an acquired ability and influenced by work experience and education level.

This study summarizes the views of relevant scholars and defines creativity as an important characteristic (ability) of founders to generate novel ideas and inventively solve problems.

Business Model Innovation

The concept of business model innovation stems from scholars’ exploration of business models. The business model is to design the transaction content, transaction structure, and transaction governance of the enterprise to realize value creation by taking advantage of business opportunities ( Zott et al., 2011 ). Business model innovation is seen as a systematic solution to overcome obstacles. However, it is understudied, especially in emerging economies ( Xu et al., 2021 ). Business model innovation is the redesign of existing business models, involving the establishment of new value propositions, value creation systems, and value acquisition mechanisms to achieve business model re-engineering ( Teece, 2010 ; Schneider and Spieth, 2013 ).

In terms of conceptual definition, Schneider and Spieth (2013) believe that business model innovation is the purpose of changing the existing strategic planning of enterprises, transforming and reconstructing the business management model, and achieving the purpose of enhancing corporate value and promoting enterprise growth. Aspara et al. (2011) believe that business model innovation is the process innovation of enterprises for potential customers, including business process and channel innovation.

The business model as the basic logic and strategic choice of the enterprise ( Shafer et al., 2005 ), mainly revolves around value capture and value creation. It is widely accepted that business model innovation is regarded as an innovation in value creation, value proposition, and value acquisition ( Guo et al., 2015 ; Clauss, 2017 ; Yang et al., 2017 ). Value creation innovation refers to the innovation of resources and capabilities used by enterprises to create value in the value chain ( Achtenhagen et al., 2013 ), including new capabilities, new technologies or equipment, new partners, and new processes. Value proposition innovation is the innovation of solutions provided to customers and the way of presenting solutions ( Morris et al., 2005 ; Johnson et al., 2008 ), including new products, new channels, and new customer relationships. Value acquisition innovation refers to innovation that translates value propositions into revenue ( Baden-Fuller and Haefliger, 2013 ), including a new profit model, and a new cost structure ( Clauss, 2017 ).

Business Growth

The growth of new ventures has received increasing attention from scholars ( Lee and Tsang, 2001 ; Gilbert et al., 2006 ). Because the environment in which new companies operate is rapidly changing, focusing solely on corporate performance does not objectively reflect the true state of the enterprise, while the growth of the enterprise can reflect the success of the enterprise ( Lee and Tsang, 2001 ; McGrath, 2010 ). New ventures refer to enterprises that have not been established for a long time and have not yet gotten out of the survival dilemma, nor have they reached a stage of standardized and professional management. Enterprises in this stage are characterized by small scale, inexperience, and strong flexibility. Innovative ideas are the basis for the survival of these enterprises, which can play an effective role once they create an exploratory business model suitable for the internal development of the enterprise. At the same time, as a new venture is managed by an entrepreneur, the values of the enterprise are also concentrated on the entrepreneur. Therefore, we choose such enterprises as the target of our research to highlight the role of founders and business model innovation in the growth of enterprises. Business growth measures the state of the company in terms of sales revenue, employee growth, and market share ( Gilbert et al., 2006 ). Creativity, as an important business asset for business success ( De Miranda et al., 2009 ), influences the growth of business.

Studies have shown that managers’ creativity has a significant impact on business growth ( Bilton, 2010 ), Smith et al. (2010) have found that creativity has an important impact on the creation and growth of the business. However, his research mostly has focused on the study of team creativity and organizational creativity. Founders are an important driver of employee creativity and their relationship to enterprise growth has not been extensively studied. In recent years, business model innovation has become an important way for companies to achieve rapid growth ( Zott and Amit, 2013 ). It has been a huge success for businesses by influencing their marketing models, and changing stakeholder relationships and corporate strategy ( Cortimiglia et al., 2016 ). The innovative behavior of enterprises depends on the creativity of founders, business model innovation as a form of innovation, requires the role of creativity, based on this paper proposes the following theoretical model, see Figure 1 .

Figure 1. Conceptual framework.

Founder Creativity and Business Growth

Studies have shown that the growth of a business is closely related to the creativity of its founders. Creativity is reflected in the process of founders creating and growing new businesses, and they are good at using novel ideas or ideas to gain an advantage for the business. Research by Bilton (2010) argues that the presence of creativity helps individuals to actively seek out new business opportunities and make more valuable discoveries that drive the creation of new value and maintain competitive advantage. Therefore, the creativity of this founder is an important driving force for the long-term development of the enterprise.

In the context of China’s emerging economy, the growth of enterprises is facing more uncertainties. The research by Cai et al. (2020) shows that opportunity development in this context requires the founder to have a certain degree of creativity. By using novel thinking and innovative ways, founders can solve the problems faced by enterprises to achieve growth. Including fierce market competition, shortage of resources, and lack of experience. Therefore, rich creativity helps to generate new ideas and propose creative solutions to problems. Through the improvement of product quality and the improvement of the marketing model, firms will win the recognition of customers and thus increase market share ( Kilgour and Koslow, 2009 ).

Empirical research by Im and Workman (2004) confirms that creativity is positively correlated with the growth of a company’s sales revenue. The creativity of the founders also contributes to the formation of an innovative culture and atmosphere within the enterprise. The stronger an individual’s creativity, the greater the creativity of his team. Geroski et al. (2009) surveyed 529 manufacturing companies and found that companies with a creative culture are more profitable and grow faster. Because creative culture enables companies to innovate their products, services, and technical processes. They can use new methods to improve operational efficiency and reduce operating costs based on meeting the changing needs of customers ( Aldrich and Martinez, 2007 ). Based on the above analysis, this paper proposes the following assumptions.

H1: Founders’ creativity is positively related to business growth.

Business Model Innovation and Business Growth

Many studies have focused on the impact of business model innovation on enterprises. It is described as a highly innovative and exploratory process ( Johnson et al., 2008 ). Unlike technological innovation or product innovation, business model innovation is essentially the uninterrupted discovery and development of opportunities ( Grewal and Tansuhaj, 2001 ), which influence business growth in many ways.

Pohle and Chapman (2006) study IBM and discover that business model innovation can bring many benefits to the business including reducing the cost of the enterprise and rationalizing the cost structure of the enterprise. At the same time, this kind of innovative activity reduces the risk of investment and brings new market opportunities to companies. Amit and Zott (2001) believe that business model innovation is the source of value creation for companies and their suppliers, partners, and customers. Especially when the external environment is highly uncertain and difficult to predict. On the one hand, business model innovation activities help enterprises to resist potential risks. On the other hand, enterprises through value creation innovation, value proposition innovation, and value acquisition innovation take advantage of new opportunities to fully tap the resources and capabilities of enterprises to help enterprises gain a competitive advantage ( Casadesus-Masanell and Zhu, 2013 ) to promote business growth.

Sorescu et al. (2011) studied business model innovation in retail and found that the value proposition outlines how companies create value through activities related to product development and pricing. Value capture outlines how companies can be governed, and reduce opportunity costs. By illustrating the way how value creation and value capture are created, the sources of competitive advantage can be more clearly described. By focusing on the value of the customer, managers are constantly adapting to the changing needs of customers from an outside-in perspective ( Sorescu et al., 2011 ). The growth of enterprises can be realized through innovative value propositions. Therefore, through innovative value proposition, value capture, and value creation, we can implement product iterations, and cost savings and gain competitive advantages for enterprises to drive enterprise growth.

Business model innovation enables firms to establish network boundaries that allow them to explore opportunities and capture value more effectively ( Zott and Amit, 2007 , 2013 ). Research by Pries and Guild (2011) confirms that business model innovation helps companies turn new products or technologies into revenue on time. Latifi et al. (2021) studies have found that BMI can affect the efficiency, organizational ability, and income of enterprises, thus affecting the growth of enterprises. Chen et al. (2021) find out growth is also achieved through the indirect effect of business model innovation on customer trust and commitment. Therefore, business model innovation can maintain the sustainable growth of enterprises through multiple paths. Paths include seizing opportunities in volatile environments, reducing costs, and increasing flexibility ( Pohle and Chapman, 2006 ; Bock et al., 2012 ), and leveraging existing systems of resources and capabilities ( Schneider and Spieth, 2013 ). Based on this, this study proposes the hypothesis:

H2: Business model innovation is positively impacting business growth.

Founders’ Creativity and Business Model Innovation

Creativity is a prerequisite for innovation ( Anderson et al., 2014 ). Innovation is defined as the generation of creative ideas and the implementation of these ideas into “new products, new services, new processes” ( Amabile, 1988 ; Amabile et al., 1996 ). Business model innovation takes advantage of new opportunities and represents a comprehensive change in the organization ( Chesbrough, 2010 ; Demil and Lecocq, 2010 ; Guo et al., 2015 ; Zhang et al., 2018 ).

Creative leaders will give more encouragement and support to the team, and the team led by them has more behavioral factors that encourage creativity ( Amabile et al., 1996 ). At this point, creative behavior manifests itself among managers and their teams, creating interactions that translate ideas into new products, services, processes, markets, and even suppliers ( Johannessen et al., 2001 ). Creative teams generate more ideas, analyze the most promising ideas and implement product and service innovations, thus creating value for the organization ( Gundry et al., 2016 ).

Founders directly determine the authorization and creation of enterprises, so their decision-making power plays an important role in the business model innovation of enterprises ( Kaner, 2014 ). Founders’ creativity leads to innovative business models through exploration. March’s (1991) study found that incremental improvements to existing ideas and breakthroughs from new ones were necessary to sustain and renew the business. This helps organizations maintain deliverability and develop new or even conflicting business models while maintaining existing ones ( Johnson et al., 2008 ).

H3: Founders’ creativity is positively related to business model innovation.

Mediating Role of Business Model Innovation Between Founders’ Creativity and Business Growth

Creativity represents the typical individual characteristics of founders who indirectly influence corporate output through a series of actions or processes ( Frese, 2009 ), where innovation is the critical path. For example, Hon and Leung (2011) argue that creative founders apply new ideas and create an atmosphere and culture of innovation within the organization. The culture of innovation is a key influential factor in achieving resource optimization and organizational process change. A culture of innovation drives changes. Innovative organizational culture helps members of the organization to participate in the development of new products, and provide new products and services to customers ( Claver et al., 1998 ; Perry-Smith, 2006 ).

Creativity also helps to break down the cognitive barriers of founders. The founder’s motivation to innovate in the business model is suppressed by the forces of inertia because the founder has cognitive impairment ( Chesbrough, 2010 ) and the founder has a continuity of behavior patterns with his employees. As a result, existing business models discourage founders from changing the logic of existing value creation and value acquisition ( Huang et al., 2013 ). Mayfield and Mayfield (2008) argue that entrepreneurial creativity can break inertia by eliminating oneself and employees’ fears of change and innovation, and by making employees more positive about innovative behavior. Garfield et al. (2001) propose a creativity support system within the organization, which is used as a tool for enterprise innovation to facilitate the formation of innovation by stimulating individuals and eliminating individual cognitive inertia. Therefore, creativity can break the inertia of the original business model to promote innovation, thereby promoting business growth.

Individual-based creativity can induce founders to generate new ways of value creation and value propositions. On the one hand, rich creativity helps individuals to think about how to efficiently use the resources and capabilities of the enterprise. Through creative resource integration, the originally inactive resource elements and material assets are activated and transformed into corresponding values. On the other hand, creativity helps to discover the diverse needs of customers ( Horn and Salvendy, 2006 ). Creative individuals place more emphasis on investing in human and social capital ( Makri and Scandura, 2010 ). Individual creativity positively influences firms and helps them build stable customer relationships, supplier networks, and other partnerships by making stakeholders feel the novelty and adaptation of the work or service ( Lepak et al., 2007 ). Therefore, unleashing the creativity of founders not only fully captures customer needs, but also helps companies discover new ways and new ways of creating value for stakeholders ( Casadesus-Masanell and Zhu, 2013 ). Help companies form new value propositions by discovering competitors’ market positioning, products, and services, strengths and weaknesses. That is, the formation of new business models ( Shu et al., 2012 ; Clauss, 2017 ). These innovative business models drive companies to better identify and capitalize on opportunities ( Grewal and Tansuhaj, 2001 ; Xiao et al., 2021 ), meeting customer and market needs to bring about rapid growth ( Zott and Amit, 2010 ). Creativity also contributes to the formation of novel and meaningful ideas that are necessary for innovation ( Amabile, 1988 ). That is, creativity is conducive to enterprises producing novel ways of value creation, thereby improving corporate performance and bringing about corporate growth. Based on the above analysis, this study proposes the hypothesis:

H4: Business model innovation mediates the relationship between founders’ creativity and business growth.

Moderating Role of Work Experience

Work experience is the accumulated experience of the entrepreneur in the previous work field ( Shane, 2001 ). In the study of work experience, researchers take the working experience and working years of entrepreneurs as important standards to measure work experience. Previous studies have found that there is a positive correlation between work experience and individual performance. Work experience is closely related to the formation of entrepreneurs’ implicit knowledge ( Wu and Ma, 2018 ), which affects the achievement of individual core work tasks.

The influence of work experience on innovation and entrepreneurship activities has been concerned by many scholars. According to the research, entrepreneurs’ previous work experience includes knowledge of finance, marketing, management, etc., which can significantly enhance entrepreneurs’ identification of opportunities ( Shane, 2001 ). In other words, entrepreneurs’ work experience has accumulated knowledge for entrepreneurs to carry out innovative activities, and this knowledge will affect entrepreneurs’ identification of subsequent opportunities. A high level of work experience will bring a high level of opportunity identification ability, which can help enterprises understand and grasp the market trend, grasp the potential market demand, and take targeted activities to respond to the market environment. Especially in the context of a transition economy, various available business opportunities provide important opportunities for business model innovation. Under the tide of the digital economy, it has brought great influence to the reform of the business model.

In addition, Shan and Lu (2020) found that entrepreneurs’ entrepreneurial experience has a positive impact on experiential learning, which further supports the importance of experience in entrepreneurial activities. However, entrepreneurial experience does not always lead to positive results for new businesses. The key to using it effectively is to learn from experience and turn it into entrepreneurial knowledge. Entrepreneurial experience and managerial experience enhance the complexity of their business planning ( Ma et al., 2021 ).

As a personality trait of entrepreneurs, a founder’s creativity will influence the formation of innovative ideas, and thus affect their innovative decisions for enterprises. Work experience provides entrepreneurs with commercially valuable information and knowledge about markets, and products, and enables entrepreneurs to effectively synthesize situations to identify innovative ideas. It plays a complementary role in their innovation decisions, which may strengthen the relationship between creativity and business model innovation.

H5: Work experience moderates the relationship between founders’ creativity and business model innovation. Compared with a low level of work experience, the positive correlation between founders’ creativity and business model innovation is stronger under the influence of a high level of work experience.

Moderated Mediating Effect

Hypothesis 4 explains the mediating effect between founders’ creativity and business growth, and hypothesis 5 explains the moderating effect of work experience on the relationship between founders’ creativity and business model innovation. Based on the above discussion, this paper proposes a moderated mediation model to explore the influence mechanism and conditions of founders’ creativity on business model innovation. When founders have higher work experience, the positive correlation between creativity and business model innovation is stronger, and the impact of creativity transmitted through business model innovation on enterprise growth is correspondingly stronger. Therefore, the following hypothesis is proposed.

H6: Work experience positively moderates the indirect effect of founders’ creativity on business growth through business model innovation. That is, the higher the Work experience, the greater the mediating effect of business model innovation.

Materials and Methods

Sample and procedure.

The study tested the theoretical model using data from Chinese start-ups in the Yangtze River Delta region, including Beijing, Tianjin, Shanghai, and Suzhou. Participants are recruited as follows. First of all, MBA students from Jilin University and Zhengzhou University are sent questionnaires by email to their companies. At the beginning of the questionnaire, we explain the research procedures and emphasized that the research is conducted for academic purposes under the condition of complete confidentiality. We connect founders and other managers through their executives. The questionnaire is filled out by the founder and then by other senior executives of the company, such as the CMO or the CEO.

Two sets of questionnaires are designed for this study. The questionnaire research consists of two stages: in stage 1, the founders of enterprises need to complete the questionnaire survey on the predictive variables (individual creativity level) and control variables (age, gender, and education level) at the individual level. One month later, in stage 2, other executives were asked to complete enterprise-level questionnaires on dependent variables (enterprise growth), mediating variables (business model innovation), and team-level control variables (enterprise size, enterprise establishment time).

Finally, A total of 192 enterprises were surveyed, including 405 participants. Four hundred and five individual-level questionnaires and 192 team-level questionnaires are collected. Among them, 145 questionnaires at the individual level and 39 questionnaires at the team level were discarded due to lack of data, leaving 153 sets of valid questionnaires at the individual level and team level. Among them, nine questionnaires were removed because of their establishment years. Thirty were submitted because their answers were incomplete.

The sample characteristics are as follows: 73.86% for technology enterprises, and 26.14% for no-technology enterprises. In terms of ownership, 66.01% of the samples were private or holding enterprises. In terms of enterprise size, 45.10% of the sample of enterprises with less than or equal to 50 employees, 54.90% of the sample of enterprises with more than 50 employees. The average age of companies was 8.82 years. The characteristics of samples are shown in Table 1 .

Table 1. Characteristics of samples.

All scale items are originally developed in English and therefore translated into Chinese. Likert 7-point scale is used for all scale items, ranging from 1 = “strongly disagree/unlikely” to 7 = “strongly agree/probably.”

Enterprise Growth

The scale of enterprise growth is adopted from Gilbert et al. (2006) . The three types of questions are measured as follows: (1) The growth rate of enterprise sales revenue. the growth rate of enterprise market share. (2) The growth rate of the number of employees in an enterprise. (3) The interviewees will evaluate according to the actual situation of the enterprise. The Cronbach’s alpha for the scale of enterprise growth is 0.733.

Founder creativity is measured with four questions and developed by Khedhaouria et al. (2015) . The items such as (1) founders have the confidence to solve problems creatively. (2) Founders are good at developing original ideas. (3) Founders tend to try new approaches at work. (4) Founders play a creative role well. The Cronbach’s alpha for this scale is 0.891.

Business model innovation includes three categories: value creation innovation, value proposition innovation, and value capture innovation. Business model innovation is measured with three topics scale developed by Clauss (2017) . The nine items for measuring value create innovations as follows: New Capabilities. (1) Our employees are constantly trained to develop new capabilities. (2) We constantly reflect and think about the latest capabilities needed to cope with market changes. New Technologies (New Equipment) (3) Our company’s technical resources are up to date. (4) We often take advantage of new technology opportunities to expand our portfolio of products and services. New Partner. (5) We are always looking for new partners. (6) We often take advantage of opportunities arising from the integration of new partners into us. (7) New partners often help us develop our business model further. New Process. (8) We use innovative procedures and processes in the manufacturing of our products. (9) We regularly review existing processes and make major changes as needed. The Cronbach’s alpha for the scale of value creates innovations is 0.936.

The seven items for measuring value proposition Innovation are as follows: New Supply. (1) We often deal with new, unmet customer needs. (2) Our products and services are innovative, and we usually solve problems that our competitors can’t solve. New Customers and Markets. (3) We are often able to seize opportunities that arise in new or growing markets. (4) We constantly seek new customer segments and markets for our products and services. New Channel. (5) We often use new distribution channels for our products and services. New Customer Relationships (6) We try to increase customer retention by offering new services. (7) We emphasize innovation/modern actions to improve customer retention. The Cronbach’s alpha for the scale of value proposition Innovation is 0.917.

Value capture innovation is measured with four items. New Profit Model . (1) We have recently developed new revenue opportunities (e.g., additional sales, cross-selling). (2) We are increasingly offering integrated services (such as maintenance contracts) to achieve long-term financial returns. (3) We recently supplemented or replaced one transaction revenue with a long-term recurring revenue model such as leasing. New Cost Structure. (4) We actively look for opportunities to save manufacturing costs. The Cronbach’s alpha for this scale is 0.878.

Control Variables

Previous studies have shown that demographic variables and enterprise characteristics may affect team creativity. Including the size of the company, age of the company, and entrepreneur’s education level. Because of the different sizes of the enterprise, the founders have different control over the enterprise. Similarly, the different establishment time and operation mechanism of enterprises affect the degree of influence of creativity on business model. Therefore, we set enterprise-scale and establishment time as control variables at the enterprise level. At the individual level, we take into account the education level of the founders, because the education level will affect the founders’ work attitude, values and management level ( Hambrick and Mason, 1984 ). Therefore, these variables are controlled in this research. Enterprise-scale is divided into four levels according to the number of employees (1 = less than 20 employees, 2 = 20–50 employees, 3 = 50–200 people, 4 = more than 200 people). Company age refers to the number of years of registration at the time of the survey. Entrepreneur’s education is divided into four levels (1 = high school or below, 2 = junior college, 3 = bachelor degree, 4 = master degree or PhD).

Common Method Bias

According to Podsakoff and Organ (1986) , Harman’s single factor test is used to examine the problem of common method bias (CMB). Principal component factor analysis shows that no single factor can explain most of the variance. The largest factor only accounted for 23.51% of the variance. Therefore, CMB did not appear in this study.

Data Analysis

To analyze the validity of the questionnaire, this study uses the statistical software SPSS 25.0 to analyze the obtained sample data: By KMO test and Bartlett sphericity test, the results show that KMO = 0.911 and Bartlett test is significant at P < 0.001 level.

The reliability and validity test results of core variables, founders’ creativity, business model innovation, work experience, and enterprise growth are shown in Table 2 . It can be seen from Table 2 that the factor values of the questions corresponding to each variable are all above 0.7 (only one-factor value is 0.62). Cronbach’s alpha coefficients involved in the reliability test are all more than 0.8. The combined reliability CR is above 0.7 and AVE is more than 0.5, indicating that the scale had good internal consistency and convergence validity. This fully shows that the questionnaire has good validity and meets the requirements of further data analysis.

Table 2. Reliability and validity test results.

Correlation Analysis and Hypothesis Testing

The results of descriptive statistics and correlation analysis (Pearson) are shown in Table 3 . Describe descriptive statistics and correlations between the main variables used in the regression analysis. We examined the multicollinearity problem carefully. Pearson correlation coefficients between these core variables were all less than 0.6. Then the variance inflation factor (VIF) is calculated. All VIF results were below 10. Hair et al. (1998) showed that there was no significant multicollinearity.

Table 3. Descriptive statistics and correlation matrix for the variables.

We use hierarchical linear analysis to test models and hypotheses. The results are shown in Table 4 . Model 1 shows the influence of control variables on enterprise growth. The results show that except for education level, other control variables do not influence enterprise growth. Model 2 is established to verify the main effect. The results showed that the coefficient of creativity is 0.358 (model 2: β = 0.358; p < 0.001). The results show that creativity has a positive impact on enterprise growth. Therefore, hypothesis 1 is supported by the sample.

Table 4. The results of regression analysis.

Model 3 verifies the impact of business model innovation on enterprise growth. The results show that the coefficient of business model innovation is 0.757 (model 3: β = 0.757; p < 0.001), which verifies the positive effect of business model innovation on enterprise growth. Based on the results, we can confirm hypothesis 2. The results of model 5 show that founders’ creativity has a positive impact on business model innovation (model 5: β = 0.540; p < 0.001). Hypothesis 3 is confirmed.

We use the study of Baron and Kenny (1986) to examine the mediating role of business model innovation. We compared model 2 with model 4. The results showed that the regression coefficient of model 4 is –0.070 (model 4: β = –0.070; ns) are lower than that in model 2 (model 2: β = 0.358; p < 0.001). The results in Model 5 show that founders’ creativity has a positive impact on business model innovation (model 5: β = 0.540; p < 0.001). Therefore, business model innovation has a positively mediating effect between founders’ creativity and business growth. Based on the above analysis, hypothesis 4 is also supported by data.

Testing the moderating effect of work experience. From model 6, it can be seen that the interaction term between the founder’s creativity and work experience (model 6: β = 0.211; p < 0.001) had a significant positive impact on business model innovation, suggesting that founders’ work experience enhanced the positive correlation between founders’ creativity and business model innovation. Figure 2 shows that when the founder has a high level of work experience, the founder’s creativity has a stronger correlation with business model innovation, and the slope is larger. Hypothesis 5 is supported.

Figure 2. Interactive effect of founders creativity and work experience on business model innovation.

In this paper, the Process program is used to test the moderated mediating effect and calculate the mediating effect under different levels of work experience. The results are shown in Table 5 . It can be seen that there is a significant difference between the two indirect effects, indicating that the mediating effect of business model innovation is moderated by work experience under high and low working experience, and hypothesis H6 has been verified. In addition, according to the index, work experience moderates the mediating effect of business model innovation is 0.167, and the confidence interval does not include 0, which further indicates that work experience strengthens the mediating effect of business model innovation on founders’ creativity and enterprise growth.

Table 5. Results of moderated mediating effect test.

This paper takes entrepreneurial enterprises as the research object and based on insufficient research on creativity and business model innovation, deeply discusses how creativity can influence business model innovation and bring enterprise growth. From the perspective of business model innovation, it reveals the key role path of the founder’s creativity in enterprise growth. The results of empirical analysis based on the survey samples in China show that a founder’s creativity has a positive impact on firm growth. Business model innovation plays a positive mediating role between founder creativity and firm growth. Work experience strengthened the positive correlation between creativity and business model innovation. Work experience reinforces the mediating role of business model innovation between creativity and firm growth.

The relevant conclusions make up for the deficiency of existing research. The empirical research results support the research model proposed in this paper, and the main findings are as follows:

First, we found that founders’ creativity is an important driving force for the growth of enterprises. Founder creativity is the unique ability to conceive novel ideas and identify valuable business opportunities ( Heinonen et al., 2011 ; Tu and Yang, 2013 ; Siemon and Robra-Bissantz, 2018 ). Unlike the founder’s management skills, which keep a business on track, creativity is about thinking new and doing something new that no one else has done before. Creativity is more important than a rigorous attitude, disciplined management, corporate reputation, and even a vision of the future. It can guide enterprises to find the direction of success in an increasingly complex world, especially in unexpected changes ( Sijabat et al., 2021 ). In the era of rapid change in enterprise products, homogenized competition, and limited resources force enterprises to use new thinking to win long-term development. The empirical research in this paper also well confirms this point of view.

Second, we found that business model innovation is the cornerstone of enterprise growth. Business model innovation is comprehensively reflected in putting forward new value propositions for organizations, designing novel value creation systems or improving original value capture mechanisms, and creating new or reshaping existing business models ( Guo et al., 2015 ). These innovative activities will create new profit models and unique competitive advantages for enterprises, and lay a foundation for enterprise growth. Some enterprises through business model innovation, such as providing customers with novel products or services ( Visnjic et al., 2016 ); new customer relationships ( Baden-Fuller and Haefliger, 2013 ), developing new markets, establishing the organization to establish a unique ability to distinguish itself from other competitors. This is reflected in the organization to build a new profit model or optimize the cost structure, to create profits. Therefore, business model innovation promotes the long-term development of enterprises by establishing new logic and new ways of creating and acquiring value ( Casadesus-Masanell and Zhu, 2013 ). All these provide references for enterprises in practice.

Third, business model innovation is an important way to give play to a founder’s creativity and realize enterprise growth. We further expand the feature-innovation-growth model and find that business model innovation is the mediation between the founder’s creativity and the firm’s growth ( Laguir and Den Besten, 2016 ). Previous studies have shown that there may be a potential relationship between business model innovation and creativity. Taking a founder’s creativity as a part of entrepreneurship is an important antecedent of business model innovation because the decisions related to business model innovation are closely related to the founder’s creativity. Founders’ creativity helps to overcome the obstacles of thinking inertia ( Mayfield and Mayfield, 2008 ), form an innovative organizational culture, discover business opportunities through creative thinking ( Geroski et al., 2009 ) change organizational structure, explore new technologies and other ways, innovate business models to shape new competitive advantages and bring about enterprise growth.

Fourth, the indirect impact of founders’ creativity on firm growth is moderated by founders’ work experience. Based on the higher-order theory, low-level work experience may not be able to use their creativity, while high-level work experience may be better at using their creativity in business model innovation that is more conducive to the growth of the organization. In other words, founder work experience has a greater moderating effect on founder creativity and business model innovation. The greater the mediating effect of business model innovation on founder creativity and firm growth.

Theoretical Application

An important theoretical contribution of this study is to reveal the role of founder creativity on business model innovation. Existing researches mainly discuss the connotation, process, and effect of business model innovation on competitive advantage, as well as the effect of organizational factors or external environmental factors on business model innovation. However, as the role of the founder, the core figure of new enterprises has been neglected, and some existing researchers have also emphasized that the relationship between creativity and enterprise innovation is not clear ( Sarooghi et al., 2015 ). In particular, there is a lack of research on how its creative characteristics affect business model innovation. This study believes that founder creativity, as a special talent of founders, helps to promote founders to form a good organizational atmosphere for innovation in the process of entrepreneurship and realize business model innovation through organizational change and other ways. Relevant research conclusions make up for the deficiencies of existing theoretical research on business model innovation.

Another theoretical contribution of this paper is to explore the important mechanism of founder creativity on firm growth and reveal how founder creativity brings firm growth through business model innovation. Current research usually discusses the direct role of creativity and firm performance ( Peljko et al., 2017 ), neglecting theoretical research on the path and mechanism through which creativity affects new firms. Based on the theoretical logic of “founder characteristics-behavior-firm output,” this paper systematically analyzes the internal relationship among founder creativity, business model innovation, and firm growth. This study proposes that creativity can bring sustainable competitive advantage and expand market share for enterprises by influencing the innovation of value proposition, value creation, and value acquisition, to realize enterprise growth. The research results help to make up for the lack of research on the role of founder characteristics on organizational behavior and firm growth.

Finally, work experience is incorporated into the theoretical analysis framework to reveal the boundary conditions of the impact of founder creativity on business model innovation, which is helpful to enrich the research on management autonomy. Current studies on the situational mechanism of the impact of creativity on business models pay little attention to the impact mechanism of work experience. From the perspective of management decisions, this paper explores the moderating effect of work experience on the relationship between creativity and business model innovation ( Cooper and Bruno, 1977 ; Barringer et al., 2005 ). Research on the contingency mechanism of the influence of founder creativity, a personality trait, on business model innovation. Work experience provides managers with more information to make decisions, thus increasing the likelihood of successful innovation for founders.

Practical Application

First of all, the research results show that creativity can affect the growth of enterprises in many ways. Therefore, it is wise for team founders to utilize their creativity and realize the growth of their companies. The creativity of founders helps enterprises to use innovative thinking to find opportunities that are hard to be seen by others, and promote the growth of enterprises by launching creative products or services that fully meet the needs of consumers. In addition, creativity can give entrepreneurial teams a good atmosphere for innovation and help enterprises update information and knowledge constantly according to the changes in the environment. In the practice of entrepreneurship, not all good managers are creative. Managing the enterprise well does not make the enterprise innovative, but innovation is an important factor driving the growth of the enterprise. Just as Silicon Valley has spawned countless excellent companies, their founders are more creative than they can manage, which is why Silicon Valley has become the most concentrated and successful place for entrepreneurship and innovation. Therefore, the founders of enterprises should pay attention to maintaining and cultivating their creativity, especially in the fierce dynamic competition environment, need to develop new ideas, find and create better opportunities, to continue to grow for the enterprise.

Second, enterprises should pay attention to model innovation under the new background. Innovation is not only reflected in technological innovation. Under the background of the “new normal” of China’s economy, traditional industries with homogenized product contents can give new vitality to traditional industries through business model innovation and integration with the Internet in the new situation. Taking books as an example, the value proposition it provides to customers is no longer just knowledge acquisition but brings new value appreciation to books by adding new propositions such as ornamental value and collection value. Traditional manufacturing enterprises, such as Nike, have achieved value co-creation through outsourcing. By outsourcing, Nike eliminates activities at the bottom of the value chain and streamlines the organizational structure to increase efficiency and reduce costs. When this value co-creation extends to the Internet era, that is, the business model of sharing platform is derived. When more and more new models are combined with traditional industries, a new round of growth advantages will be brought to traditional enterprises.

Third, as an important intermediary between founder creativity and enterprise growth, business model innovation is an effective tool for innovation of new enterprises in the new era. Chinese enterprises are facing the problem of enterprise transformation, but it is difficult to change the concept of entrepreneurs, especially the chairman and CEO of listed companies aged between 45 and 60, lack of motivation for transformation, “powerless” becomes an important obstacle to transformation. For founders who are focused on the long term, being creative is critical, because creativity is likely to be the engine of transformation. Some studies found through multiple case studies that when enterprises with rapid growth face model competition across multiple industries, founders with the motivation to disrupt the industry have the ability of discontinuous management, that is, creativity is the key to successful innovation of business model. The application of creativity to the innovation of business model does not require a large cost of reform, but it can give full play to the role of the founder’s new thinking and new decision, achieve breakthroughs in transaction mode, operation mode, and management mode, and reduce the risk of innovation investment. The innovation mode should be oriented by customer value, enhance the added value of products and seek opportunities from customer demand. This requires founders to use creativity to find and dig opportunities, innovate value propositions, update business objectives, change the way of acquiring value, and always develop new business models for the organization centering on customer value, thus bringing the growth of enterprises.

At the same time, Chinese enterprises have been at the bottom of the industrial chain for a long time. The innovation of the business model can help enterprises gradually occupy a favorable position and even lead the industrial format by extending the industrial chain. When the external environment is constantly changing, many enterprises are faced with the problem of transformation and development, which requires founders to carry out business model innovation with new ideas. In this process, founders should not only have the creative thinking to redefine customer value and create new rules, but also have the innovation ability to upgrade and reshape the business model, and gradually upgrade to the dual drive of “model innovation and technology innovation,” improve competitive advantages, to achieve long-term and stable growth.

Fourth, work experience moderates the influence of founder creativity and business model innovation. Team leaders should pay attention to the accumulation of work experience. On the one hand, it is the accumulation of industry knowledge. Having relevant industry experience will help entrepreneurs skillfully obtain industry development information, analyze industry changes, and better grasp market demand ( Politis, 2005 ). On the other hand, it is the summary and learning of past work experience and entrepreneurial experience. These industry experiences can enhance entrepreneurs’ foresight and judgment on the development direction and uncertainty of the industry involved, thus reducing the materiality and uncertainty of entrepreneurs in the process of entrepreneurship.

Limitations and Future Research

Despite the theoretical and practical contributions of this study, there are still some potential limitations. First, this paper only discusses the impact of the individual creativity of enterprise founders on the growth of enterprises, without discussing the role of other individual characteristics. Although this paper discusses the role of founders’ creativity in the growth of enterprises, founders’ decisions cannot completely control the direction of enterprises, and assertive behavior is not conducive to the development of enterprises. Other team members also play an important role in the development of the team. In the future, the interaction between founders’ other characteristics and creative characteristics as well as the interaction between founders and other members on the impact of corporate growth will be studied.

Second, the average age of the enterprises studied in this paper is 8.82 years old, and they are in different stages of enterprise development (growth, maturity, etc.). The application of founder creativity varies at different stages of an enterprise. The research conclusion of this paper provides a transformation path of business model innovation for enterprises that have established and want to obtain sustainable competitive advantages, but not all enterprises at all stages need the same degree of innovation. Future research will consider the different applications of founder characteristics at different stages of an enterprise.

Third, this research results indicate that in the Internet age, the vast majority of companies can grow through the innovative business model for enterprises, but the approach to innovation may be varied with the change in business environment and industry differences and different, therefore, future research should combine environment and industry background, has more practical meaning.

Data Availability Statement

The raw data supporting the conclusions of this article will be made available by the authors, without undue reservation.

Ethics Statement

The studies involving human participants were reviewed and approved by School of Management, Jilin University. The patients/participants provided their written informed consent to participate in this study. Written informed consent was obtained from the individual(s) for the publication of any potentially identifiable images or data included in this article.

Author Contributions

YL developed theoretical models, wrote manuscripts, and was responsible for empirical analysis. BL collected and analyzed the data and participated in manuscript writing. TL co-wrote the manuscript. All authors contributed to the article and approved the submitted version.

Conflict of Interest

The authors declare that the research was conducted in the absence of any commercial or financial relationships that could be construed as a potential conflict of interest.

Publisher’s Note

All claims expressed in this article are solely those of the authors and do not necessarily represent those of their affiliated organizations, or those of the publisher, the editors and the reviewers. Any product that may be evaluated in this article, or claim that may be made by its manufacturer, is not guaranteed or endorsed by the publisher.

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Keywords : creativity, business model innovation, business growth, empirical research, work experience

Citation: Li Y, Li B and Lu T (2022) Founders’ Creativity, Business Model Innovation, and Business Growth. Front. Psychol. 13:892716. doi: 10.3389/fpsyg.2022.892716

Received: 09 March 2022; Accepted: 11 May 2022; Published: 10 June 2022.

Reviewed by:

Copyright © 2022 Li, Li and Lu. This is an open-access article distributed under the terms of the Creative Commons Attribution License (CC BY) . The use, distribution or reproduction in other forums is permitted, provided the original author(s) and the copyright owner(s) are credited and that the original publication in this journal is cited, in accordance with accepted academic practice. No use, distribution or reproduction is permitted which does not comply with these terms.

*Correspondence: Beiwei Li, [email protected]

Disclaimer: All claims expressed in this article are solely those of the authors and do not necessarily represent those of their affiliated organizations, or those of the publisher, the editors and the reviewers. Any product that may be evaluated in this article or claim that may be made by its manufacturer is not guaranteed or endorsed by the publisher.

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How Creativity and Innovation Enhance Business Growth and Development

Andrew Herkert

June 23rd, 2020

Creativity in Business

Depending on the nature of your business, you might already have a strong idea of how creativity and innovation benefit your company. If you’re anything like TruScribe, the line is direct: our creative output benefits our clients, which benefits us. However, maybe your company’s product isn’t as directly tied to creativity as ours. You’ve likely heard that increasing creative and innovative work can give your business a serious boost.  Let’s explore how creativity and innovation can enhance business growth and development, no matter what industry you’re in.

Creativity and innovation lead to higher overall success in organizations, even more so than raw intelligence. Traditional companies and educational institutions tend to prize intelligence as the most important factor in problem-solving. However, this preference might have been born out of ease rather than best practices.  

After all, it is “easier to measure and manage” intelligence over creativity , which can be harder to identify.  When creative thinking is prioritized, positive feedback is received, and encouragement is given to solve problems creatively, the company will see improvement.

Blend Two Types of Thinking

Creativity also encourages people to grow in their ways of thinking.  Divergent thinking, or exploration of numerous unconventional possible solutions to a problem, is a hallmark of the creative process.  Alternatively, convergent thinkers are those who excel at analysis and reaching accurate solutions to problems. When you pair divergent thinking with convergent thinkers, problem-solving becomes a ‘best of both worlds’ experience.  Convergent, conventional thought keeps the project focused and grounded, while divergent thought provides novel and unexpected solutions.

Those unexpected solutions can directly translate into new and exciting products and services—and, quickly, organizational success.  This happens through the process of innovation, which you can see as a graduation point of the creative process.  

As divergent thinking and conventional methods meet and produce ideas, take these ideas a step further.  Innovation demands implementation, so put some of your creative team’s ideas into practice.  It can help keep you ahead of the competition, reach new markets, and provide existing markets with interesting new reasons to revisit your company’s website—and buy.

Embrace the Fundamentals of Innovation

Like creativity, innovation can take many forms—and, like recognizing creativity, recognizing innovation might be harder than one would think.  For one thing, it can be a “series of small, incremental changes” instead of a single, ground-breaking change.  

Since innovation “fundamentally… means introducing something new into your business,” you might already be engaging in more innovation than you realize.  Each time you improve a process, draft a new policy, add value to a product, or install fresh facilities, you’re innovating.  You’re implementing new ideas, which took creativity to discover.

Create a Creative Workplace

Creative thinking can also lead to innovation that will grow your business through increased productivity .  When you “focus on what things you can streamline and what things you need to cut out” while keeping the systems that perform well, you’ll build a simpler, more efficient workplace.  Creative thinking lets you come up with ideas that will excite and motivate your team.

Of course, productivity can slow down unexpectedly at times, so think of creativity and innovation not as endpoints, but as ongoing commitments.  “You can update… anytime to remain productive,” so do so.  Don’t stifle the potential of the approaches by sticking doggedly to their first results.  Creativity and innovation work best as a continual practice.  You might even consider asking your team for occasional check-ins, feedback, and suggestions for possible next improvements.

Speaking of asking your team about innovation, Laura Stack suggests actually creating an innovation team.  This team, “comprised of members with diverse working styles, experience, and skill-sets, whose primary purpose is to get together to innovate,” could exist permanently or intermittently.  

Stack’s best choice of words in her description of this team is “diverse”.  Diversity of thought goes beyond simply having convergent and divergent thinkers in the same group. It means incorporating a diversity of backgrounds, beliefs, perspectives, and more.  

Stack’s mention of skill-sets adds an even stronger dimension to the diversity she suggests: interdepartmental cooperation.  When you innovate with a cross-functional team, you increase not only the number and quality of ideas presented; you create stronger harmony within your organization, and foster a stronger sense of unity.  

When departments are physically separated, it can be harder to maintain a feeling of togetherness throughout the company.  By putting different team members on your innovation team, you’ll increase the diversity of thought, and reinforce the team’s camaraderie.

Reach New Heights

Creativity and innovation can be the pathways for your business to reach new heights of product value, process improvement, productivity, marketing success, and internal harmony.  The creative process can lead to novel ideas and concepts. This is especially true when the divergent thinking it requires is complemented by conventional convergent thought,  

When a diverse, cross-functional team looks to innovate through the implementation of creative ideas, they’ll work more effectively, flexibly, and with a greater sense of unity.  From product designs that are miles ahead of the competition to minor office changes, any new improvement to your business is innovation. This process doesn’t happen just once, either.

A continued dedication to creativity, and innovative use of creative ideas can drive a business’ growth impressively.  All it takes is a comfort with the approach and encouragement of the process. And with these kinds of benefits, why not get comfortable?

Do you think your company innovates frequently?  Have you, in fact, been innovating without realizing it?  Does your company promote and encourage creativity?  How does it do that?  How might you begin to encourage creativity and innovation in your organization?

Introduction: Technological Innovation and International Competitiveness for Business Growth—State-of-the-Art

• First Online: 23 October 2020

Cite this chapter

• João J. M. Ferreira 5 ,
• Sérgio J. Teixeira 6 , 7 &
• Hussain G. Rammal 8  

Part of the book series: Palgrave Studies in Democracy, Innovation, and Entrepreneurship for Growth ((DIG))

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This introductory chapter highlights and brings a greater understanding of the theme of technological innovation and international competitiveness for business growth. Collectively, this book attempts to give a panoply of approaches to make possible an integrative but multifaceted perspective of the theme. Specifically, in this introduction, we summarize the fourteen highly varied and insightful chapters that make this book and conclude with a discussion that points to new directions for future research in this field. In sum, we hope to encourage scholars, policymakers, and others to discover relevant insights on technological innovation and international competitiveness that will help them to make informed decisions for their businesses in this increasingly uncertain and ever-changing world.

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Acknowledgements

The authors would like to acknowledge and thank NECE—Research Unit in Business Sciences funded by the Multiannual Funding Programme of R&D Centres of FCT—Fundação para a Ciência e a Tecnologia, under the project ‘UID/GES/04630/2020’ and ISAL Research Centre.

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João J. M. Ferreira

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Sérgio J. Teixeira

NECE—Research Unit in Business Sciences, Funchal, Portugal

UTS Business School, University of Technology Sydney, Sydney, Australia

Hussain G. Rammal

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Ferreira, J.J.M., Teixeira, S.J., Rammal, H.G. (2021). Introduction: Technological Innovation and International Competitiveness for Business Growth—State-of-the-Art. In: Ferreira, J.J.M., Teixeira, S.J., Rammal, H.G. (eds) Technological Innovation and International Competitiveness for Business Growth. Palgrave Studies in Democracy, Innovation, and Entrepreneurship for Growth. Palgrave Macmillan, Cham. https://doi.org/10.1007/978-3-030-51995-7_1

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Founders’ Creativity, Business Model Innovation, and Business Growth

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Given the existing studies on the role of different founders’ personalities in the growth of new ventures, we take the digital technology start-ups as the research object and focus on the role of founders’ creativity. In this study, we assess the relationship between founders’ creativity and business growth. According to the framework of upper echelons theory, we propose several hypotheses. Based on the investigation of 153 new ventures in China’s transition economy, we find that: (1) founders’ creativity has a positive impact on the growth of enterprises; (2) business model innovation positively mediates the relationship between founders’ creativity and enterprise growth; (3) work experience is found to be a moderator of the relationship between founders’ creativity and business model innovation. The conclusion of our analysis not only helps to further deepen the research on the growth process of start-ups but also helps to further expand the important role of business model innovation and founders’ work experience in the growth of new firms.

Introduction

Business model innovation has received a lot of attention from scholars and is considered to be a key driver of new venture growth and sustainable competitive advantage. The study points out that the business model of enterprises is not static, especially in today’s international context of technological progress and rapid changes in market demand ( Onetti et al., 2012 ; Wu, 2021 ). In entrepreneurial practice, more and more enterprises rely on business model innovation. In entrepreneurial practice, more and more enterprises rely on business model innovation to obtain corporate performance. For example, the domestic retail giant Suning Corporation, driven by Internet technology, has broken through the business model of traditional retail services, integrated into the e-commerce thinking, and gradually defined itself as “Suning Cloud Business,” leaving Gome Electrical Appliances in the same industry behind.

Some studies have pointed out that business model innovation is even more valuable than technological innovation to some extent ( Teece, 2010 ; Bhatti and Danilovic, 2018 ), because business models are an important bridge for transforming new technologies into economic value, and through business model innovation, they promote the efficient commercialization of technology, thus bringing about the rapid growth of enterprises ( Chesbrough, 2007 ). Especially in a dynamic environment, business model innovation helps companies cope with complex changes in external markets ( Smajlović et al., 2019 ). It is precisely because of the important value of business model innovation that more scholars focus on the factors that promote/hinder business model innovation ( Chesbrough, 2010 ; Bhatti and Danilovic, 2018 ; Snihur and Zott, 2020 ), such as the original value allocation mode of enterprises, technical conditions, leadership characteristics, and organizational changes, organizational learning ( Sosna et al., 2010 ; Koch et al., 2018 ), changes in the market environment, value networks ( Smajlović et al., 2019 ). Previous studies have mainly analyzed the role of organizational factors or external environmental factors on business model innovation. In recent years, scholars have gradually discovered that the founders of enterprises play a key role in the business model design process ( Smith et al., 2010 ; Svejenova et al., 2010 ). Although scholars have explored the role of entrepreneurs’ entrepreneurship, background characteristics, social capital, and behavior in business model design ( Bhatti et al., 2021 ; Zhao et al., 2021 ), the mechanism of how entrepreneurs’ characteristics influence business model innovation and lead to firm growth has been neglected.

To address this theoretical gap, this study focuses on the core characteristic of founders’ creativity. Existing research has found that the creativity of individuals (founders) contributes to the formation of entrepreneurial intentions ( Hu et al., 2018 ), opportunity identification, and enterprise development ( Dayan et al., 2013 ; Shane and Nicolaou, 2015 ; Farsi et al., 2019 ), business survival/growth ( Mambula and Sawyer, 2004 ; Zhang et al., 2018 ), new product development ( Im and Workman, 2004 ; Castillo-Vergara and Garcia-Perez-de-Lema, 2021 ). There is a lack of research on the impact of creativity on firm growth from the perspective of business model innovation. According to the Upper Echelons theory, top managers will give personalized explanations of the situation they face, thus making strategic decisions that lead to the growth of the enterprise ( Hambrick and Mason, 1984 ). Therefore, this study has important theoretical value and attempts to solve the following two key problems through large-scale questionnaire surveys and empirical analysis: (1) how founders’ creativity and business model innovation affect enterprise growth, (2) the mediating role of business model innovation in the process of founders’ creativity affecting enterprise growth.

As mentioned above, founder creativity provides the premise for business model innovation and makes the team have more basis and willingness for innovation. However, the founder’s experience is also crucial to innovation decisions. Work experience usually refers to the experience that entrepreneurs have accumulated in their previous work fields, including knowledge of finance, marketing, management, etc. ( Shane, 2001 ). The high level of work experience reflects that founders are better at seizing market opportunities and taking advantage of market conditions, and can identify more valuable opportunities for innovation and increase the possibility of innovative business models. Therefore, this study further explores the moderating effect of founders’ work experience on the relationship between their creativity and business model innovation.

In summary, we establish a novel framework for studying the impact of creativity on firm growth, with special attention to the mediating role of business model innovation and the moderating role of work experience. This study aims to make several contributions to the existing literature. First, this study contributes to the current literature by studying business model innovation as an intermediate process between SME creativity and firm growth. It also responds to Baron and Tang’s (2011) call to explore the mechanisms by which individual entrepreneurs encourage innovation at the firm level. Secondly, this study empirically examines the potential relationship between creativity and firm growth, thereby contributing to the literature on business model innovation by identifying the antecedents of business model innovation. Third, given the lack of research on boundary conditions of the relationship between entrepreneurial creativity and business model innovation, this study adds to the research on business model innovation by examining work experience as a moderator, which may promote or limit the impact of creativity on business model innovation.

Theoretical Background and Hypotheses

Founders’ creativity.

Creativity is considered by scholars to be a common trait possessed by successful founders ( Pretorius et al., 2005 ) that helps inspire founders to generate new ideas and turn the idea into business opportunities to be exploited ( Gielnik et al., 2012 ). Creativity is a complex and important business asset ( De Miranda et al., 2009 ), helping founders cope with dilemmas such as a fiercely competitive environment, a changing market, and new technology needs. Creativity drives innovative activities in business and is considered a significant source of innovative activities to promote the development of new products/services, and organizational innovation ( Cook, 1998 ; Heye, 2006 ).

As an individual-level concept, Perry-Smith (2006) defines creativity as an individual’s ability to generate novel ideas, new products, and solutions. Munizu and Hamid (2018) studied founders as the object of study, believing that creativity is a key skill possessed by founders. Creativity is an important source of innovation that drives the development of new businesses and new products/services. Research by Ahlin et al. (2014) argues that creativity is a personal trait that founders have. It shows that founders can often generate novel ideas and are good at using innovative ways to solve problems.

Founder creativity refers to personal traits that founders have. It shows that founders can often generate novel ideas and are good at using innovative ways to solve problems ( Ahlin et al., 2014 ). It is an innate trait of the founder. The founder’s cognitive style is an individual difference in the preferred way of organizing and processing information and experience ( Messick, 1996 ), which is an acquired ability and influenced by work experience and education level.

This study summarizes the views of relevant scholars and defines creativity as an important characteristic (ability) of founders to generate novel ideas and inventively solve problems.

Business Model Innovation

The concept of business model innovation stems from scholars’ exploration of business models. The business model is to design the transaction content, transaction structure, and transaction governance of the enterprise to realize value creation by taking advantage of business opportunities ( Zott et al., 2011 ). Business model innovation is seen as a systematic solution to overcome obstacles. However, it is understudied, especially in emerging economies ( Xu et al., 2021 ). Business model innovation is the redesign of existing business models, involving the establishment of new value propositions, value creation systems, and value acquisition mechanisms to achieve business model re-engineering ( Teece, 2010 ; Schneider and Spieth, 2013 ).

In terms of conceptual definition, Schneider and Spieth (2013) believe that business model innovation is the purpose of changing the existing strategic planning of enterprises, transforming and reconstructing the business management model, and achieving the purpose of enhancing corporate value and promoting enterprise growth. Aspara et al. (2011) believe that business model innovation is the process innovation of enterprises for potential customers, including business process and channel innovation.

The business model as the basic logic and strategic choice of the enterprise ( Shafer et al., 2005 ), mainly revolves around value capture and value creation. It is widely accepted that business model innovation is regarded as an innovation in value creation, value proposition, and value acquisition ( Guo et al., 2015 ; Clauss, 2017 ; Yang et al., 2017 ). Value creation innovation refers to the innovation of resources and capabilities used by enterprises to create value in the value chain ( Achtenhagen et al., 2013 ), including new capabilities, new technologies or equipment, new partners, and new processes. Value proposition innovation is the innovation of solutions provided to customers and the way of presenting solutions ( Morris et al., 2005 ; Johnson et al., 2008 ), including new products, new channels, and new customer relationships. Value acquisition innovation refers to innovation that translates value propositions into revenue ( Baden-Fuller and Haefliger, 2013 ), including a new profit model, and a new cost structure ( Clauss, 2017 ).

Business Growth

The growth of new ventures has received increasing attention from scholars ( Lee and Tsang, 2001 ; Gilbert et al., 2006 ). Because the environment in which new companies operate is rapidly changing, focusing solely on corporate performance does not objectively reflect the true state of the enterprise, while the growth of the enterprise can reflect the success of the enterprise ( Lee and Tsang, 2001 ; McGrath, 2010 ). New ventures refer to enterprises that have not been established for a long time and have not yet gotten out of the survival dilemma, nor have they reached a stage of standardized and professional management. Enterprises in this stage are characterized by small scale, inexperience, and strong flexibility. Innovative ideas are the basis for the survival of these enterprises, which can play an effective role once they create an exploratory business model suitable for the internal development of the enterprise. At the same time, as a new venture is managed by an entrepreneur, the values of the enterprise are also concentrated on the entrepreneur. Therefore, we choose such enterprises as the target of our research to highlight the role of founders and business model innovation in the growth of enterprises. Business growth measures the state of the company in terms of sales revenue, employee growth, and market share ( Gilbert et al., 2006 ). Creativity, as an important business asset for business success ( De Miranda et al., 2009 ), influences the growth of business.

Studies have shown that managers’ creativity has a significant impact on business growth ( Bilton, 2010 ), Smith et al. (2010) have found that creativity has an important impact on the creation and growth of the business. However, his research mostly has focused on the study of team creativity and organizational creativity. Founders are an important driver of employee creativity and their relationship to enterprise growth has not been extensively studied. In recent years, business model innovation has become an important way for companies to achieve rapid growth ( Zott and Amit, 2013 ). It has been a huge success for businesses by influencing their marketing models, and changing stakeholder relationships and corporate strategy ( Cortimiglia et al., 2016 ). The innovative behavior of enterprises depends on the creativity of founders, business model innovation as a form of innovation, requires the role of creativity, based on this paper proposes the following theoretical model, see Figure 1 .

Conceptual framework.

Founder Creativity and Business Growth

Studies have shown that the growth of a business is closely related to the creativity of its founders. Creativity is reflected in the process of founders creating and growing new businesses, and they are good at using novel ideas or ideas to gain an advantage for the business. Research by Bilton (2010) argues that the presence of creativity helps individuals to actively seek out new business opportunities and make more valuable discoveries that drive the creation of new value and maintain competitive advantage. Therefore, the creativity of this founder is an important driving force for the long-term development of the enterprise.

In the context of China’s emerging economy, the growth of enterprises is facing more uncertainties. The research by Cai et al. (2020) shows that opportunity development in this context requires the founder to have a certain degree of creativity. By using novel thinking and innovative ways, founders can solve the problems faced by enterprises to achieve growth. Including fierce market competition, shortage of resources, and lack of experience. Therefore, rich creativity helps to generate new ideas and propose creative solutions to problems. Through the improvement of product quality and the improvement of the marketing model, firms will win the recognition of customers and thus increase market share ( Kilgour and Koslow, 2009 ).

Empirical research by Im and Workman (2004) confirms that creativity is positively correlated with the growth of a company’s sales revenue. The creativity of the founders also contributes to the formation of an innovative culture and atmosphere within the enterprise. The stronger an individual’s creativity, the greater the creativity of his team. Geroski et al. (2009) surveyed 529 manufacturing companies and found that companies with a creative culture are more profitable and grow faster. Because creative culture enables companies to innovate their products, services, and technical processes. They can use new methods to improve operational efficiency and reduce operating costs based on meeting the changing needs of customers ( Aldrich and Martinez, 2007 ). Based on the above analysis, this paper proposes the following assumptions.

• H1: Founders’ creativity is positively related to business growth.

Business Model Innovation and Business Growth

Many studies have focused on the impact of business model innovation on enterprises. It is described as a highly innovative and exploratory process ( Johnson et al., 2008 ). Unlike technological innovation or product innovation, business model innovation is essentially the uninterrupted discovery and development of opportunities ( Grewal and Tansuhaj, 2001 ), which influence business growth in many ways.

Pohle and Chapman (2006) study IBM and discover that business model innovation can bring many benefits to the business including reducing the cost of the enterprise and rationalizing the cost structure of the enterprise. At the same time, this kind of innovative activity reduces the risk of investment and brings new market opportunities to companies. Amit and Zott (2001) believe that business model innovation is the source of value creation for companies and their suppliers, partners, and customers. Especially when the external environment is highly uncertain and difficult to predict. On the one hand, business model innovation activities help enterprises to resist potential risks. On the other hand, enterprises through value creation innovation, value proposition innovation, and value acquisition innovation take advantage of new opportunities to fully tap the resources and capabilities of enterprises to help enterprises gain a competitive advantage ( Casadesus-Masanell and Zhu, 2013 ) to promote business growth.

Sorescu et al. (2011) studied business model innovation in retail and found that the value proposition outlines how companies create value through activities related to product development and pricing. Value capture outlines how companies can be governed, and reduce opportunity costs. By illustrating the way how value creation and value capture are created, the sources of competitive advantage can be more clearly described. By focusing on the value of the customer, managers are constantly adapting to the changing needs of customers from an outside-in perspective ( Sorescu et al., 2011 ). The growth of enterprises can be realized through innovative value propositions. Therefore, through innovative value proposition, value capture, and value creation, we can implement product iterations, and cost savings and gain competitive advantages for enterprises to drive enterprise growth.

Business model innovation enables firms to establish network boundaries that allow them to explore opportunities and capture value more effectively ( Zott and Amit, 2007 , 2013 ). Research by Pries and Guild (2011) confirms that business model innovation helps companies turn new products or technologies into revenue on time. Latifi et al. (2021) studies have found that BMI can affect the efficiency, organizational ability, and income of enterprises, thus affecting the growth of enterprises. Chen et al. (2021) find out growth is also achieved through the indirect effect of business model innovation on customer trust and commitment. Therefore, business model innovation can maintain the sustainable growth of enterprises through multiple paths. Paths include seizing opportunities in volatile environments, reducing costs, and increasing flexibility ( Pohle and Chapman, 2006 ; Bock et al., 2012 ), and leveraging existing systems of resources and capabilities ( Schneider and Spieth, 2013 ). Based on this, this study proposes the hypothesis:

• H2: Business model innovation is positively impacting business growth.

Founders’ Creativity and Business Model Innovation

Creativity is a prerequisite for innovation ( Anderson et al., 2014 ). Innovation is defined as the generation of creative ideas and the implementation of these ideas into “new products, new services, new processes” ( Amabile, 1988 ; Amabile et al., 1996 ). Business model innovation takes advantage of new opportunities and represents a comprehensive change in the organization ( Chesbrough, 2010 ; Demil and Lecocq, 2010 ; Guo et al., 2015 ; Zhang et al., 2018 ).

Creative leaders will give more encouragement and support to the team, and the team led by them has more behavioral factors that encourage creativity ( Amabile et al., 1996 ). At this point, creative behavior manifests itself among managers and their teams, creating interactions that translate ideas into new products, services, processes, markets, and even suppliers ( Johannessen et al., 2001 ). Creative teams generate more ideas, analyze the most promising ideas and implement product and service innovations, thus creating value for the organization ( Gundry et al., 2016 ).

Founders directly determine the authorization and creation of enterprises, so their decision-making power plays an important role in the business model innovation of enterprises ( Kaner, 2014 ). Founders’ creativity leads to innovative business models through exploration. March’s (1991) study found that incremental improvements to existing ideas and breakthroughs from new ones were necessary to sustain and renew the business. This helps organizations maintain deliverability and develop new or even conflicting business models while maintaining existing ones ( Johnson et al., 2008 ).

• H3: Founders’ creativity is positively related to business model innovation.

Mediating Role of Business Model Innovation Between Founders’ Creativity and Business Growth

Creativity represents the typical individual characteristics of founders who indirectly influence corporate output through a series of actions or processes ( Frese, 2009 ), where innovation is the critical path. For example, Hon and Leung (2011) argue that creative founders apply new ideas and create an atmosphere and culture of innovation within the organization. The culture of innovation is a key influential factor in achieving resource optimization and organizational process change. A culture of innovation drives changes. Innovative organizational culture helps members of the organization to participate in the development of new products, and provide new products and services to customers ( Claver et al., 1998 ; Perry-Smith, 2006 ).

Creativity also helps to break down the cognitive barriers of founders. The founder’s motivation to innovate in the business model is suppressed by the forces of inertia because the founder has cognitive impairment ( Chesbrough, 2010 ) and the founder has a continuity of behavior patterns with his employees. As a result, existing business models discourage founders from changing the logic of existing value creation and value acquisition ( Huang et al., 2013 ). Mayfield and Mayfield (2008) argue that entrepreneurial creativity can break inertia by eliminating oneself and employees’ fears of change and innovation, and by making employees more positive about innovative behavior. Garfield et al. (2001) propose a creativity support system within the organization, which is used as a tool for enterprise innovation to facilitate the formation of innovation by stimulating individuals and eliminating individual cognitive inertia. Therefore, creativity can break the inertia of the original business model to promote innovation, thereby promoting business growth.

Individual-based creativity can induce founders to generate new ways of value creation and value propositions. On the one hand, rich creativity helps individuals to think about how to efficiently use the resources and capabilities of the enterprise. Through creative resource integration, the originally inactive resource elements and material assets are activated and transformed into corresponding values. On the other hand, creativity helps to discover the diverse needs of customers ( Horn and Salvendy, 2006 ). Creative individuals place more emphasis on investing in human and social capital ( Makri and Scandura, 2010 ). Individual creativity positively influences firms and helps them build stable customer relationships, supplier networks, and other partnerships by making stakeholders feel the novelty and adaptation of the work or service ( Lepak et al., 2007 ). Therefore, unleashing the creativity of founders not only fully captures customer needs, but also helps companies discover new ways and new ways of creating value for stakeholders ( Casadesus-Masanell and Zhu, 2013 ). Help companies form new value propositions by discovering competitors’ market positioning, products, and services, strengths and weaknesses. That is, the formation of new business models ( Shu et al., 2012 ; Clauss, 2017 ). These innovative business models drive companies to better identify and capitalize on opportunities ( Grewal and Tansuhaj, 2001 ; Xiao et al., 2021 ), meeting customer and market needs to bring about rapid growth ( Zott and Amit, 2010 ). Creativity also contributes to the formation of novel and meaningful ideas that are necessary for innovation ( Amabile, 1988 ). That is, creativity is conducive to enterprises producing novel ways of value creation, thereby improving corporate performance and bringing about corporate growth. Based on the above analysis, this study proposes the hypothesis:

• H4: Business model innovation mediates the relationship between founders’ creativity and business growth.

Moderating Role of Work Experience

Work experience is the accumulated experience of the entrepreneur in the previous work field ( Shane, 2001 ). In the study of work experience, researchers take the working experience and working years of entrepreneurs as important standards to measure work experience. Previous studies have found that there is a positive correlation between work experience and individual performance. Work experience is closely related to the formation of entrepreneurs’ implicit knowledge ( Wu and Ma, 2018 ), which affects the achievement of individual core work tasks.

The influence of work experience on innovation and entrepreneurship activities has been concerned by many scholars. According to the research, entrepreneurs’ previous work experience includes knowledge of finance, marketing, management, etc., which can significantly enhance entrepreneurs’ identification of opportunities ( Shane, 2001 ). In other words, entrepreneurs’ work experience has accumulated knowledge for entrepreneurs to carry out innovative activities, and this knowledge will affect entrepreneurs’ identification of subsequent opportunities. A high level of work experience will bring a high level of opportunity identification ability, which can help enterprises understand and grasp the market trend, grasp the potential market demand, and take targeted activities to respond to the market environment. Especially in the context of a transition economy, various available business opportunities provide important opportunities for business model innovation. Under the tide of the digital economy, it has brought great influence to the reform of the business model.

In addition, Shan and Lu (2020) found that entrepreneurs’ entrepreneurial experience has a positive impact on experiential learning, which further supports the importance of experience in entrepreneurial activities. However, entrepreneurial experience does not always lead to positive results for new businesses. The key to using it effectively is to learn from experience and turn it into entrepreneurial knowledge. Entrepreneurial experience and managerial experience enhance the complexity of their business planning ( Ma et al., 2021 ).

As a personality trait of entrepreneurs, a founder’s creativity will influence the formation of innovative ideas, and thus affect their innovative decisions for enterprises. Work experience provides entrepreneurs with commercially valuable information and knowledge about markets, and products, and enables entrepreneurs to effectively synthesize situations to identify innovative ideas. It plays a complementary role in their innovation decisions, which may strengthen the relationship between creativity and business model innovation.

• H5: Work experience moderates the relationship between founders’ creativity and business model innovation. Compared with a low level of work experience, the positive correlation between founders’ creativity and business model innovation is stronger under the influence of a high level of work experience.

Moderated Mediating Effect

Hypothesis 4 explains the mediating effect between founders’ creativity and business growth, and hypothesis 5 explains the moderating effect of work experience on the relationship between founders’ creativity and business model innovation. Based on the above discussion, this paper proposes a moderated mediation model to explore the influence mechanism and conditions of founders’ creativity on business model innovation. When founders have higher work experience, the positive correlation between creativity and business model innovation is stronger, and the impact of creativity transmitted through business model innovation on enterprise growth is correspondingly stronger. Therefore, the following hypothesis is proposed.

• H6: Work experience positively moderates the indirect effect of founders’ creativity on business growth through business model innovation. That is, the higher the Work experience, the greater the mediating effect of business model innovation.

Materials and Methods

Sample and procedure.

The study tested the theoretical model using data from Chinese start-ups in the Yangtze River Delta region, including Beijing, Tianjin, Shanghai, and Suzhou. Participants are recruited as follows. First of all, MBA students from Jilin University and Zhengzhou University are sent questionnaires by email to their companies. At the beginning of the questionnaire, we explain the research procedures and emphasized that the research is conducted for academic purposes under the condition of complete confidentiality. We connect founders and other managers through their executives. The questionnaire is filled out by the founder and then by other senior executives of the company, such as the CMO or the CEO.

Two sets of questionnaires are designed for this study. The questionnaire research consists of two stages: in stage 1, the founders of enterprises need to complete the questionnaire survey on the predictive variables (individual creativity level) and control variables (age, gender, and education level) at the individual level. One month later, in stage 2, other executives were asked to complete enterprise-level questionnaires on dependent variables (enterprise growth), mediating variables (business model innovation), and team-level control variables (enterprise size, enterprise establishment time).

Finally, A total of 192 enterprises were surveyed, including 405 participants. Four hundred and five individual-level questionnaires and 192 team-level questionnaires are collected. Among them, 145 questionnaires at the individual level and 39 questionnaires at the team level were discarded due to lack of data, leaving 153 sets of valid questionnaires at the individual level and team level. Among them, nine questionnaires were removed because of their establishment years. Thirty were submitted because their answers were incomplete.

The sample characteristics are as follows: 73.86% for technology enterprises, and 26.14% for no-technology enterprises. In terms of ownership, 66.01% of the samples were private or holding enterprises. In terms of enterprise size, 45.10% of the sample of enterprises with less than or equal to 50 employees, 54.90% of the sample of enterprises with more than 50 employees. The average age of companies was 8.82 years. The characteristics of samples are shown in Table 1 .

Characteristics of samples.

All scale items are originally developed in English and therefore translated into Chinese. Likert 7-point scale is used for all scale items, ranging from 1 = “strongly disagree/unlikely” to 7 = “strongly agree/probably.”

Enterprise Growth

The scale of enterprise growth is adopted from Gilbert et al. (2006) . The three types of questions are measured as follows: (1) The growth rate of enterprise sales revenue. the growth rate of enterprise market share. (2) The growth rate of the number of employees in an enterprise. (3) The interviewees will evaluate according to the actual situation of the enterprise. The Cronbach’s alpha for the scale of enterprise growth is 0.733.

Founder creativity is measured with four questions and developed by Khedhaouria et al. (2015) . The items such as (1) founders have the confidence to solve problems creatively. (2) Founders are good at developing original ideas. (3) Founders tend to try new approaches at work. (4) Founders play a creative role well. The Cronbach’s alpha for this scale is 0.891.

Business model innovation includes three categories: value creation innovation, value proposition innovation, and value capture innovation. Business model innovation is measured with three topics scale developed by Clauss (2017) . The nine items for measuring value create innovations as follows: New Capabilities. (1) Our employees are constantly trained to develop new capabilities. (2) We constantly reflect and think about the latest capabilities needed to cope with market changes. New Technologies (New Equipment) (3) Our company’s technical resources are up to date. (4) We often take advantage of new technology opportunities to expand our portfolio of products and services. New Partner. (5) We are always looking for new partners. (6) We often take advantage of opportunities arising from the integration of new partners into us. (7) New partners often help us develop our business model further. New Process. (8) We use innovative procedures and processes in the manufacturing of our products. (9) We regularly review existing processes and make major changes as needed. The Cronbach’s alpha for the scale of value creates innovations is 0.936.

The seven items for measuring value proposition Innovation are as follows: New Supply. (1) We often deal with new, unmet customer needs. (2) Our products and services are innovative, and we usually solve problems that our competitors can’t solve. New Customers and Markets. (3) We are often able to seize opportunities that arise in new or growing markets. (4) We constantly seek new customer segments and markets for our products and services. New Channel. (5) We often use new distribution channels for our products and services. New Customer Relationships (6) We try to increase customer retention by offering new services. (7) We emphasize innovation/modern actions to improve customer retention. The Cronbach’s alpha for the scale of value proposition Innovation is 0.917.

Value capture innovation is measured with four items. New Profit Model . (1) We have recently developed new revenue opportunities (e.g., additional sales, cross-selling). (2) We are increasingly offering integrated services (such as maintenance contracts) to achieve long-term financial returns. (3) We recently supplemented or replaced one transaction revenue with a long-term recurring revenue model such as leasing. New Cost Structure. (4) We actively look for opportunities to save manufacturing costs. The Cronbach’s alpha for this scale is 0.878.

Control Variables

Previous studies have shown that demographic variables and enterprise characteristics may affect team creativity. Including the size of the company, age of the company, and entrepreneur’s education level. Because of the different sizes of the enterprise, the founders have different control over the enterprise. Similarly, the different establishment time and operation mechanism of enterprises affect the degree of influence of creativity on business model. Therefore, we set enterprise-scale and establishment time as control variables at the enterprise level. At the individual level, we take into account the education level of the founders, because the education level will affect the founders’ work attitude, values and management level ( Hambrick and Mason, 1984 ). Therefore, these variables are controlled in this research. Enterprise-scale is divided into four levels according to the number of employees (1 = less than 20 employees, 2 = 20–50 employees, 3 = 50–200 people, 4 = more than 200 people). Company age refers to the number of years of registration at the time of the survey. Entrepreneur’s education is divided into four levels (1 = high school or below, 2 = junior college, 3 = bachelor degree, 4 = master degree or PhD).

Common Method Bias

According to Podsakoff and Organ (1986) , Harman’s single factor test is used to examine the problem of common method bias (CMB). Principal component factor analysis shows that no single factor can explain most of the variance. The largest factor only accounted for 23.51% of the variance. Therefore, CMB did not appear in this study.

Data Analysis

To analyze the validity of the questionnaire, this study uses the statistical software SPSS 25.0 to analyze the obtained sample data: By KMO test and Bartlett sphericity test, the results show that KMO = 0.911 and Bartlett test is significant at P < 0.001 level.

The reliability and validity test results of core variables, founders’ creativity, business model innovation, work experience, and enterprise growth are shown in Table 2 . It can be seen from Table 2 that the factor values of the questions corresponding to each variable are all above 0.7 (only one-factor value is 0.62). Cronbach’s alpha coefficients involved in the reliability test are all more than 0.8. The combined reliability CR is above 0.7 and AVE is more than 0.5, indicating that the scale had good internal consistency and convergence validity. This fully shows that the questionnaire has good validity and meets the requirements of further data analysis.

Reliability and validity test results.

Correlation Analysis and Hypothesis Testing

The results of descriptive statistics and correlation analysis (Pearson) are shown in Table 3 . Describe descriptive statistics and correlations between the main variables used in the regression analysis. We examined the multicollinearity problem carefully. Pearson correlation coefficients between these core variables were all less than 0.6. Then the variance inflation factor (VIF) is calculated. All VIF results were below 10. Hair et al. (1998) showed that there was no significant multicollinearity.

Descriptive statistics and correlation matrix for the variables.

***p < 0.001, **p < 0.01, *p < 0.05.

We use hierarchical linear analysis to test models and hypotheses. The results are shown in Table 4 . Model 1 shows the influence of control variables on enterprise growth. The results show that except for education level, other control variables do not influence enterprise growth. Model 2 is established to verify the main effect. The results showed that the coefficient of creativity is 0.358 (model 2: β = 0.358; p < 0.001). The results show that creativity has a positive impact on enterprise growth. Therefore, hypothesis 1 is supported by the sample.

The results of regression analysis.

Model 3 verifies the impact of business model innovation on enterprise growth. The results show that the coefficient of business model innovation is 0.757 (model 3: β = 0.757; p < 0.001), which verifies the positive effect of business model innovation on enterprise growth. Based on the results, we can confirm hypothesis 2. The results of model 5 show that founders’ creativity has a positive impact on business model innovation (model 5: β = 0.540; p < 0.001). Hypothesis 3 is confirmed.

We use the study of Baron and Kenny (1986) to examine the mediating role of business model innovation. We compared model 2 with model 4. The results showed that the regression coefficient of model 4 is –0.070 (model 4: β = –0.070; ns) are lower than that in model 2 (model 2: β = 0.358; p < 0.001). The results in Model 5 show that founders’ creativity has a positive impact on business model innovation (model 5: β = 0.540; p < 0.001). Therefore, business model innovation has a positively mediating effect between founders’ creativity and business growth. Based on the above analysis, hypothesis 4 is also supported by data.

Testing the moderating effect of work experience. From model 6, it can be seen that the interaction term between the founder’s creativity and work experience (model 6: β = 0.211; p < 0.001) had a significant positive impact on business model innovation, suggesting that founders’ work experience enhanced the positive correlation between founders’ creativity and business model innovation. Figure 2 shows that when the founder has a high level of work experience, the founder’s creativity has a stronger correlation with business model innovation, and the slope is larger. Hypothesis 5 is supported.

Interactive effect of founders creativity and work experience on business model innovation.

In this paper, the Process program is used to test the moderated mediating effect and calculate the mediating effect under different levels of work experience. The results are shown in Table 5 . It can be seen that there is a significant difference between the two indirect effects, indicating that the mediating effect of business model innovation is moderated by work experience under high and low working experience, and hypothesis H6 has been verified. In addition, according to the index, work experience moderates the mediating effect of business model innovation is 0.167, and the confidence interval does not include 0, which further indicates that work experience strengthens the mediating effect of business model innovation on founders’ creativity and enterprise growth.

Results of moderated mediating effect test.

This paper takes entrepreneurial enterprises as the research object and based on insufficient research on creativity and business model innovation, deeply discusses how creativity can influence business model innovation and bring enterprise growth. From the perspective of business model innovation, it reveals the key role path of the founder’s creativity in enterprise growth. The results of empirical analysis based on the survey samples in China show that a founder’s creativity has a positive impact on firm growth. Business model innovation plays a positive mediating role between founder creativity and firm growth. Work experience strengthened the positive correlation between creativity and business model innovation. Work experience reinforces the mediating role of business model innovation between creativity and firm growth.

The relevant conclusions make up for the deficiency of existing research. The empirical research results support the research model proposed in this paper, and the main findings are as follows:

First, we found that founders’ creativity is an important driving force for the growth of enterprises. Founder creativity is the unique ability to conceive novel ideas and identify valuable business opportunities ( Heinonen et al., 2011 ; Tu and Yang, 2013 ; Siemon and Robra-Bissantz, 2018 ). Unlike the founder’s management skills, which keep a business on track, creativity is about thinking new and doing something new that no one else has done before. Creativity is more important than a rigorous attitude, disciplined management, corporate reputation, and even a vision of the future. It can guide enterprises to find the direction of success in an increasingly complex world, especially in unexpected changes ( Sijabat et al., 2021 ). In the era of rapid change in enterprise products, homogenized competition, and limited resources force enterprises to use new thinking to win long-term development. The empirical research in this paper also well confirms this point of view.

Second, we found that business model innovation is the cornerstone of enterprise growth. Business model innovation is comprehensively reflected in putting forward new value propositions for organizations, designing novel value creation systems or improving original value capture mechanisms, and creating new or reshaping existing business models ( Guo et al., 2015 ). These innovative activities will create new profit models and unique competitive advantages for enterprises, and lay a foundation for enterprise growth. Some enterprises through business model innovation, such as providing customers with novel products or services ( Visnjic et al., 2016 ); new customer relationships ( Baden-Fuller and Haefliger, 2013 ), developing new markets, establishing the organization to establish a unique ability to distinguish itself from other competitors. This is reflected in the organization to build a new profit model or optimize the cost structure, to create profits. Therefore, business model innovation promotes the long-term development of enterprises by establishing new logic and new ways of creating and acquiring value ( Casadesus-Masanell and Zhu, 2013 ). All these provide references for enterprises in practice.

Third, business model innovation is an important way to give play to a founder’s creativity and realize enterprise growth. We further expand the feature-innovation-growth model and find that business model innovation is the mediation between the founder’s creativity and the firm’s growth ( Laguir and Den Besten, 2016 ). Previous studies have shown that there may be a potential relationship between business model innovation and creativity. Taking a founder’s creativity as a part of entrepreneurship is an important antecedent of business model innovation because the decisions related to business model innovation are closely related to the founder’s creativity. Founders’ creativity helps to overcome the obstacles of thinking inertia ( Mayfield and Mayfield, 2008 ), form an innovative organizational culture, discover business opportunities through creative thinking ( Geroski et al., 2009 ) change organizational structure, explore new technologies and other ways, innovate business models to shape new competitive advantages and bring about enterprise growth.

Fourth, the indirect impact of founders’ creativity on firm growth is moderated by founders’ work experience. Based on the higher-order theory, low-level work experience may not be able to use their creativity, while high-level work experience may be better at using their creativity in business model innovation that is more conducive to the growth of the organization. In other words, founder work experience has a greater moderating effect on founder creativity and business model innovation. The greater the mediating effect of business model innovation on founder creativity and firm growth.

Theoretical Application

An important theoretical contribution of this study is to reveal the role of founder creativity on business model innovation. Existing researches mainly discuss the connotation, process, and effect of business model innovation on competitive advantage, as well as the effect of organizational factors or external environmental factors on business model innovation. However, as the role of the founder, the core figure of new enterprises has been neglected, and some existing researchers have also emphasized that the relationship between creativity and enterprise innovation is not clear ( Sarooghi et al., 2015 ). In particular, there is a lack of research on how its creative characteristics affect business model innovation. This study believes that founder creativity, as a special talent of founders, helps to promote founders to form a good organizational atmosphere for innovation in the process of entrepreneurship and realize business model innovation through organizational change and other ways. Relevant research conclusions make up for the deficiencies of existing theoretical research on business model innovation.

Another theoretical contribution of this paper is to explore the important mechanism of founder creativity on firm growth and reveal how founder creativity brings firm growth through business model innovation. Current research usually discusses the direct role of creativity and firm performance ( Peljko et al., 2017 ), neglecting theoretical research on the path and mechanism through which creativity affects new firms. Based on the theoretical logic of “founder characteristics-behavior-firm output,” this paper systematically analyzes the internal relationship among founder creativity, business model innovation, and firm growth. This study proposes that creativity can bring sustainable competitive advantage and expand market share for enterprises by influencing the innovation of value proposition, value creation, and value acquisition, to realize enterprise growth. The research results help to make up for the lack of research on the role of founder characteristics on organizational behavior and firm growth.

Finally, work experience is incorporated into the theoretical analysis framework to reveal the boundary conditions of the impact of founder creativity on business model innovation, which is helpful to enrich the research on management autonomy. Current studies on the situational mechanism of the impact of creativity on business models pay little attention to the impact mechanism of work experience. From the perspective of management decisions, this paper explores the moderating effect of work experience on the relationship between creativity and business model innovation ( Cooper and Bruno, 1977 ; Barringer et al., 2005 ). Research on the contingency mechanism of the influence of founder creativity, a personality trait, on business model innovation. Work experience provides managers with more information to make decisions, thus increasing the likelihood of successful innovation for founders.

Practical Application

First of all, the research results show that creativity can affect the growth of enterprises in many ways. Therefore, it is wise for team founders to utilize their creativity and realize the growth of their companies. The creativity of founders helps enterprises to use innovative thinking to find opportunities that are hard to be seen by others, and promote the growth of enterprises by launching creative products or services that fully meet the needs of consumers. In addition, creativity can give entrepreneurial teams a good atmosphere for innovation and help enterprises update information and knowledge constantly according to the changes in the environment. In the practice of entrepreneurship, not all good managers are creative. Managing the enterprise well does not make the enterprise innovative, but innovation is an important factor driving the growth of the enterprise. Just as Silicon Valley has spawned countless excellent companies, their founders are more creative than they can manage, which is why Silicon Valley has become the most concentrated and successful place for entrepreneurship and innovation. Therefore, the founders of enterprises should pay attention to maintaining and cultivating their creativity, especially in the fierce dynamic competition environment, need to develop new ideas, find and create better opportunities, to continue to grow for the enterprise.

Second, enterprises should pay attention to model innovation under the new background. Innovation is not only reflected in technological innovation. Under the background of the “new normal” of China’s economy, traditional industries with homogenized product contents can give new vitality to traditional industries through business model innovation and integration with the Internet in the new situation. Taking books as an example, the value proposition it provides to customers is no longer just knowledge acquisition but brings new value appreciation to books by adding new propositions such as ornamental value and collection value. Traditional manufacturing enterprises, such as Nike, have achieved value co-creation through outsourcing. By outsourcing, Nike eliminates activities at the bottom of the value chain and streamlines the organizational structure to increase efficiency and reduce costs. When this value co-creation extends to the Internet era, that is, the business model of sharing platform is derived. When more and more new models are combined with traditional industries, a new round of growth advantages will be brought to traditional enterprises.

Third, as an important intermediary between founder creativity and enterprise growth, business model innovation is an effective tool for innovation of new enterprises in the new era. Chinese enterprises are facing the problem of enterprise transformation, but it is difficult to change the concept of entrepreneurs, especially the chairman and CEO of listed companies aged between 45 and 60, lack of motivation for transformation, “powerless” becomes an important obstacle to transformation. For founders who are focused on the long term, being creative is critical, because creativity is likely to be the engine of transformation. Some studies found through multiple case studies that when enterprises with rapid growth face model competition across multiple industries, founders with the motivation to disrupt the industry have the ability of discontinuous management, that is, creativity is the key to successful innovation of business model. The application of creativity to the innovation of business model does not require a large cost of reform, but it can give full play to the role of the founder’s new thinking and new decision, achieve breakthroughs in transaction mode, operation mode, and management mode, and reduce the risk of innovation investment. The innovation mode should be oriented by customer value, enhance the added value of products and seek opportunities from customer demand. This requires founders to use creativity to find and dig opportunities, innovate value propositions, update business objectives, change the way of acquiring value, and always develop new business models for the organization centering on customer value, thus bringing the growth of enterprises.

At the same time, Chinese enterprises have been at the bottom of the industrial chain for a long time. The innovation of the business model can help enterprises gradually occupy a favorable position and even lead the industrial format by extending the industrial chain. When the external environment is constantly changing, many enterprises are faced with the problem of transformation and development, which requires founders to carry out business model innovation with new ideas. In this process, founders should not only have the creative thinking to redefine customer value and create new rules, but also have the innovation ability to upgrade and reshape the business model, and gradually upgrade to the dual drive of “model innovation and technology innovation,” improve competitive advantages, to achieve long-term and stable growth.

Fourth, work experience moderates the influence of founder creativity and business model innovation. Team leaders should pay attention to the accumulation of work experience. On the one hand, it is the accumulation of industry knowledge. Having relevant industry experience will help entrepreneurs skillfully obtain industry development information, analyze industry changes, and better grasp market demand ( Politis, 2005 ). On the other hand, it is the summary and learning of past work experience and entrepreneurial experience. These industry experiences can enhance entrepreneurs’ foresight and judgment on the development direction and uncertainty of the industry involved, thus reducing the materiality and uncertainty of entrepreneurs in the process of entrepreneurship.

Limitations and Future Research

Despite the theoretical and practical contributions of this study, there are still some potential limitations. First, this paper only discusses the impact of the individual creativity of enterprise founders on the growth of enterprises, without discussing the role of other individual characteristics. Although this paper discusses the role of founders’ creativity in the growth of enterprises, founders’ decisions cannot completely control the direction of enterprises, and assertive behavior is not conducive to the development of enterprises. Other team members also play an important role in the development of the team. In the future, the interaction between founders’ other characteristics and creative characteristics as well as the interaction between founders and other members on the impact of corporate growth will be studied.

Second, the average age of the enterprises studied in this paper is 8.82 years old, and they are in different stages of enterprise development (growth, maturity, etc.). The application of founder creativity varies at different stages of an enterprise. The research conclusion of this paper provides a transformation path of business model innovation for enterprises that have established and want to obtain sustainable competitive advantages, but not all enterprises at all stages need the same degree of innovation. Future research will consider the different applications of founder characteristics at different stages of an enterprise.

Third, this research results indicate that in the Internet age, the vast majority of companies can grow through the innovative business model for enterprises, but the approach to innovation may be varied with the change in business environment and industry differences and different, therefore, future research should combine environment and industry background, has more practical meaning.

Data Availability Statement

Ethics statement.

The studies involving human participants were reviewed and approved by School of Management, Jilin University. The patients/participants provided their written informed consent to participate in this study. Written informed consent was obtained from the individual(s) for the publication of any potentially identifiable images or data included in this article.

Author Contributions

YL developed theoretical models, wrote manuscripts, and was responsible for empirical analysis. BL collected and analyzed the data and participated in manuscript writing. TL co-wrote the manuscript. All authors contributed to the article and approved the submitted version.

Conflict of Interest

The authors declare that the research was conducted in the absence of any commercial or financial relationships that could be construed as a potential conflict of interest.

Publisher’s Note

All claims expressed in this article are solely those of the authors and do not necessarily represent those of their affiliated organizations, or those of the publisher, the editors and the reviewers. Any product that may be evaluated in this article, or claim that may be made by its manufacturer, is not guaranteed or endorsed by the publisher.

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Cultural diversity drives innovation: empowering teams for success

International Journal of Innovation Science

ISSN : 1757-2223

Article publication date: 22 September 2020

Issue publication date: 1 October 2020

Though there is broad agreement on the beneficial impact of diversity in management and leadership roles, much of the innovative capacity of an organization is realized at the unit level in working teams. Recent research points to cultural diversity having an especially significant impact on innovation team performance. The reports also highlight the need for the optimal team operating principles to derive maximum benefit. To prepare such innovation teams for success, it is valuable to understand the dynamics of team diversity at the project level and the underlying barriers and opportunities presented.

Design/methodology/approach

This paper reviews the literature and case studies on cultural inputs to ideation and innovation, assessing team diversity through readily available instruments and the deployment of the science of team science (SciTS) principles in innovation teams.

The key learnings include the importance of establishing communication standards, SciTS principles, team assessment of thinking styles and the utility of cultural awareness instruments.

Practical implications

Diversity provides a creative advantage for innovation teams. However, team dynamics play an important role in maximizing these advantages, and cross-cultural competence of team members is required. Deployment of appropriate assessment tools and team methodologies enhances the likelihood of successful outcomes including in remote team settings.

Originality/value

Literature from diverse functional areas is summarized including the science of team science, organizational management, diversity and inclusion methodologies and ethnocultural dynamics. It provides pointers for the optimal formation and operating principles with highly culturally diverse teams.

• Implementation
• Team science

Jones, G. , Chirino Chace, B. and Wright, J. (2020), "Cultural diversity drives innovation: empowering teams for success", International Journal of Innovation Science , Vol. 12 No. 3, pp. 323-343. https://doi.org/10.1108/IJIS-04-2020-0042

Emerald Publishing Limited

Copyright © 2020, Graham Jones, Bernardita Chirino Chace and Justin Wright.

Published by Emerald Publishing Limited. This article is published under the Creative Commons Attribution (CC BY 4.0) license. Anyone may reproduce, distribute, translate and create derivative works of this article (for both commercial and non-commercial purposes), subject to full attribution to the original publication and authors. The full terms of this license may be seen at http://creativecommons.org/licences/by/4.0/legalcode

Introduction

Numerous studies confirm the positive impact of diversity at board level, executive leadership and managerial roles in organizations. In the case of innovation, in addition to strategic leadership, one must of course consider the innovation process itself, which typically involves ideators and entrepreneurs from varied backgrounds who work in smaller teams driven by strategic goals ( Nelson, 1991 ). Diversity of thought and approach are naturally assumed to be beneficial to the innovation process, which by its very nature thrives on creative tension and alternating viewpoints. Despite the potential to have a major influence on productivity and impact, relatively few dedicated studies have been reported on the links between diversity and innovation ( Joecks et al. , 2013 ). Factors to consider include, gender, cultural, ethnic, country of origin, geographic location and disciplinary diversity. Studies on gender diversity have modeled the performance impact of uniform, skewed, tilted and balanced groups, often assessed using the Blau index ( Blau, 1977 ). Although not specifically addressing innovative potential, there is overwhelming evidence that gender heterogeneous teams produce higher quality technical and scientific outputs ( Campbell et al. , 2013 ) but concerted engagement is also needed to realize these benefits fully within organizations ( Zheng, 2013 ). One study by the Boston Consulting Group modeled the impact of six components of diversity on innovation team performance (BCG, 2018). Conducted through a survey of >1,700 employees in 8 countries (Austria, Brazil, China, France, Germany, India, Switzerland and the USA) the study examined perceptions of diversity components at management level (gender, age, the nation of origin, career path, industry background and education). Two features are noteworthy. First, a statistically significant correlation was observed between innovation performance and the diversity of management teams across all six diversity indicators (approximately 20% improvement in innovation revenues). Second, the most pronounced impact driver was the nation of origin of team members ( Table 1 ).

If substantiated, this has potentially far-reaching consequences in the pharmaceutical industry where numerous multinational corporations are headquartered around the globe, and routinely assemble and engage teams (both physically and remotely) from vast and highly diverse populations. The revelation even prompted the quote “for management teams there are few slam dunks in the business world – this is one of them” (BCG, 2018). The cultural dimensions uncovered in this survey have been the subject of other research. In an unrelated study, conducted through a survey of 500 corporate executives one in two respondents believed there exists a positive correlation between cultural diversity and innovation drivers ( Bertelsmann, 2018 ). Despite this admission, some 42% of respondents indicated that their organizations did not focus on hiring diverse workforces. The study goes on to conclude that the more varied an innovation team is in terms of country of origin the greater the impact. The authors ascribe this to employees with diverse backgrounds having specific cultural knowledge, which can be deployed to assess and solve problems in different ways, and they may also have a higher tolerance for taking risks. Caution is also signaled in that different cultural methods of interpretation and values can present challenges in team settings, as there exists the potential for misunderstanding among members. This underscores the importance of studying team dynamics to maximize potential and fully exploit the value of team diversity ( vide infra ). Accordingly, the impetus for assembling this review was to highlight studies, which assess the origins and impact of cultural diversity on innovation team performance, readily available instruments, which assess cultural contributions and tools which can be deployed to optimize team dynamics. Our focus area is on innovation teams and it is of course recognized that corporate innovation is guided by business drivers which may determine the composition, scope and success factors of any given team ( Nelson, 1991 ). Nonetheless, given the significance and implications of the subject matter across various industries (BCG, 2018) it is instructive to examine even in the most general sense.

Power distance index (PDI):

“The extent to which people expect and agree that power should be shared unequally.”

A higher degree signifies hierarchy is clearly established, a lower degree that people question authority.

Individualism vs collectivism (IDV):

“Degree to which society rewards individual versus collective action.”

Higher degrees, individualistic societies, emphasize the “I” versus the “we.”

Uncertainty avoidance (UAI):

“A society’s tolerance for ambiguity.”

A higher degree suggests societies, which opt for stiff codes of behavior, guidelines and laws.

Masculinity vs femininity (MAS):

“Societal preference for achievement, heroism, assertiveness and material rewards for success.”

Its counterpart values cooperation, modesty, caring for the weak and quality of life.

Long-term orientation vs short-term orientation (LTO-STO):

“A societies’ connection of the past with the current and future actions/challenges.”

In high preference, LTO traditions are honored, whereas in STO adaptation is viewed as a necessity.

Indulgence vs restraint (IND):

“Degree of freedom societal norms afford to citizens in fulfilling their human desires.”

In its counterpart, society controls gratification and regulates by means of strict social nor.

Specimen dimensions data are presented for the six most populous nations in the world, plus Switzerland, highlighting the wide scoring ranges typically observed ( Figure 1 ). Implicit within the data are myriad dynamic factors including religious preferences, governmental structures, historical backgrounds, philosophical beliefs, coupled with socio-economic drivers e.g. education, health, poverty, incarceration rates, etc. Obviously, due caution and judgment need to be exercised when viewing such data, as individual choices, behaviors and attitudes that are contrary to those implied by the indices will be expected and stereotypes should be avoided. Additionally, great regional differences can exist within individual countries (e.g. the USA and Switzerland) and even cities (urban v suburban). It is also recognized that nations continually evolve – the disintegration of the former Yugoslavia into culturally distinct countries being a case in point. Moreover, individuals who live in different countries during their formative years would be expected to be influenced by the multiple environments and a single point of reference could be entirely misleading.

There is a negative relationship between power distance and innovation.

There is a negative relationship between uncertainty avoidance and innovation.

There is a positive relationship between individualism and innovation.

There is a negative relationship between masculinity and innovation.

Significantly, H1, H2 and H4 were supported by data regarding patenting intensity. In the case of H3 , though partially supported by data the authors concluded that the impact of family collectivism versus corporate collectivism complicated data sets, precluding a definitive outcome ( Kaasa and Vadi, 2010 ). The authors advance that a reliable link between cultural dimensions and patenting intensity does exist. Obviously, caution needs to be exercised using patents as a surrogate for innovation activity as decisions to pursue are complex undertakings, requiring significant capital investment, often describing inventions a long way prior to market introduction and which in some cases are used defensively ( Martínez-Piva, 2009 ). Nonetheless, they are generally accepted as one of several measures of performance at the so-called “fuzzy front end” of innovation or FFEI ( Gassmann and Schweitzer, 2014 ). Additional studies have examined the impact of culture on innovation ( Herbig and Dunphy, 1998 ), including national ( Shane, 1993 ) and multi-nation studies ( Dakhli and de Clercq, 2004 ), downward trends in cultural differences in Europe ( Gooderham and Nordhaug, 2002 ) and the impact of national networks ( Ahuja, 2000 ). Related work has mapped national culture correlations to two individual components of innovation, namely, the initiation and implementation phases ( Nakata and Sivakumar, 1996 ). For example, the contribution of individualism (ranked high in the USA) to the first, initiation stage of innovation can be understood (ideation and concept testing), as equally can be the value of collectivism (ranked high in Japan) to the second, implementation phase of innovation (product development and launch) which requires concerted, group effort. These studies are insightful, and, coupled with comparative re-assessments between Eastern and Western cultures ( Wu, 2006 ), have allowed researchers to correlate observed contributions to innovation with national propensities ( Smale, 2016 ).

Though understanding the drivers and proclivities of individual contributors is instructive, an obvious challenge lies in managing the dynamics of innovation teams to establish the most creative and productive environment. Studies suggest that published outputs from diverse teams are cited more frequently than from those with less heterogeneity, and the notion that ethnic diversity reflects idea diversity has been advanced ( Freeman and Huang, 2014 ). It has also been suggested that the management of teams with high cultural diversity may warrant special considerations within organizations ( Mannix and Neale, 2005 ). Accordingly, when capitalizing on opportunities imbued by cultural diversity in innovation teams, attention to cultural competence of assembled teams (cultural intelligence (CQ)) should also be studied, alongside traditional evaluative (EQ and IQ) measures.

Cross-cultural competence in innovation teams

Assembling teams who hail from a multitude of diverse cultural backgrounds is a routine occurrence in modern multinational corporations, and especially prevalent in the global pharmaceutical sector. Accordingly, a degree of cross-cultural awareness and competence could be considered a natural advantage to a team member. In addition to working within the team, cross-cultural competence could also be valuable for interactions external to the organization e.g. customers, suppliers, regulators and patients in the myriad markets the team is engaged in ( Ramalu et al. , 2010 ). For these reasons, it is logical that an assembled team considers the cultural awareness and competence (CQ) of its members ( Ang and van Dyne, 2008 ). Such insights could be reasoned to help the team establish itself and function more effectively, and would have added value within innovation teams. Creative tensions are expected and encouraged in such environments, and CQ competence could reduce the likelihood of any ad hominem behaviors by reducing potential misunderstandings and miscommunications which have cultural origins. These cultural touchpoints can range from subtle, interpersonal nuances through to organizational edicts and operating models and team members with experience would be able to mentor and socialize new colleagues. For example, when communicating decisions stemming from teams and units, in certain countries (e.g. India and Japan) they are sometimes pre-socialized in smaller groups to secure buy-in prior to formal announcements, whereas in others (e.g. the USA) external advisors are often engaged to make recommendations which are subsequently announced ( Gibson and Gibbs, 2006 ). Navigating these norms requires due diligence and skill, best gained from exposure to the cultural elements in person or through structured training. Even at the most basic level, conversational styles need to be mindful of cultural norms ( Ang and Van Dyne, 2008 ). For example, in some countries pauses in conversations are deliberate, injected to allow the parties to reflect upon and honor what was just said. Conversely, some cultures seem to promote the rapid exchange of conversational points as a sign of productivity and alignment (the USA is a good example). Accordingly, one needs to be mindful not to unintentionally show disrespect to a person based on the cadence of a conversation ( Fussell and Setlock, 2012 ). As diligent employees will no doubt be mindful of these issues in a global corporation, they can become of special significance for the effective functioning of culturally diverse teams. Another example can be observed in the way different cultures use facial expressions to communicate ( Barrett et al. , 2019 ). While in certain western countries an exaggerated smile may be offered to an individual to express welcoming and project a degree of confidence, in other countries it can be deemed inappropriate ( Coles et al. , 2019 ). Japanese business culture values humility and suppression of emotions to convey trust, and fewer emotions are communicated using the mouth (Stanford, 2016). Smiling at a stranger in other countries can be interpreted as a sign of stupidity, insanity, insincerity or even dishonesty ( Krys et al. , 2016 ). Likewise, the application of direct eye contact can be interpreted as a sign of confidence and respect in some countries whereas in others it can signal disrespect and insubordination, requiring cultural context and awareness ( Uono and Hietanen, 2015 ). In-depth studies have been conducted on the perceptions of facial expressions, including the so-called “Duchenne” smile and apparent disconnects between people’s self-reported degree of happiness and smile tendency ( Gunnery and Hall, 2014 ). It has also been determined that of a possible total of 16,384 possible facial configurations, only 35 are used to transmit emotive information across cultures and within these 8 are dominant in most cultures ( Srinivasan and Martínez, 2018 ). Correlations with the Hofstede cultural dimensions have also been explored. In countries with low scores on the uncertainty avoidance dimension (UAI) non smiling individuals were deemed as more intelligent ( Hareli and Hess, 2010 ), and second, in countries with high corruption indicators, smiling correlated with reduced levels of trust ( Ozono, 2010 ). Another crucial factor for team members relates to communication style ( Figure 2 ). Under the principles outlined by Hall ( Hall, 1977 ), individuals can be categorized as either direct or indirect communicators and there are cultural underpinnings for each ( Gudykunst and Ting-Toomey, 1988 ). Under this framework, direct communicators are seen to operate with a low situational context, with a high emphasis on actual words being spoken irrespective of any possible nuances ( Hall, 1977 ).

Conversely, an indirect communicator will place a high degree of context to the conditions under which words are spoken including tone, body language and what is not said in addition to spoken word ( Clyne et al. , 2009 ). Though most people function as a blend of the two, extreme differences between the two approaches can naturally lead to conflict or misunderstanding in team settings, e.g. where an email communication might be interpreted as blunt or obtuse by one member or straight to the point/not beating about the bush by others ( Management, 2014 ). The more culturally diverse the team, the more important it becomes to understand each member preferred communication styles, to the point of which guidelines may become appropriate ( Mayer and Bello, 2012 ). In an attempt to codify/quantitate our capacity to function effectively in culturally diverse settings, a cultural intelligence index or CQ has been developed ( Van Dyne et al. , 2012 ).

The cultural intelligence four-factor model

Metacognitive CQ, which represents a person’s consciousness and awareness of cultural cues during interactions with people from other cultural backgrounds. It has also been described as representing the processes we use to acquire and understand cultural knowledge.

Acquired through a combination of education and personal experience, cognitive CQ represents our level of competence of the conventions, practices and norms used in different cultural settings. This can include social systems and structures of other cultures and their value systems.

Motivational CQ assesses the level of interest and energy directed toward learning and functioning in situations characterized by cultural differences people with high motivational CQ express confidence in their personal cross-cultural effectiveness.

Behavioral CQ measures peoples’ ability to exhibit appropriate verbal and nonverbal behavior when interacting with people from different cultures. This may include, for example, the use of culturally appropriate words, tones, gestures and facial expressions.

Significantly within the context of this paper, a study of 73 teams with over 327 members revealed that high levels of CQ within multi-cultural teams had a positive benefits, equipping the teams to overcome numerous obstacles and potential barriers ( Moon, 2013 ). A number of scales and assessment modalities have been developed to gauge CQ competence, including the Intercultural Adjustment Potential Scale (ICAPS) ( Matsumoto et al. , 2001 ), the Cultural Intelligence Scale (CQS) and the Intercultural Developmental Inventory (IDI) ( Matsumoto and Hwang, 2013 ). While the IDI is often deployed for individuals engaging on overseas assignments and the ICAPS for individuals in global leadership roles ( Rose et al. , 2010 ), the CQS is seen as a useful assessment for multicultural teams and has been studied globally with different audiences ( Ng et al. , 2009 ). Pioneered by the Cultural Intelligence Center in the USA, the assessment focuses on specific capabilities, namely, CQ drive (motivation), knowledge (cognition), strategy (metacognition) and action (behavior) ( Figure 3 ; SHRM, 2015 ).

Respondents receive an integrated assessment including the four key dimensions, and also personal orientation on a total of 10 culture value dimensions, which are compared against tendencies within the 10 largest cultural cluster groupings recognized globally as illustrated in Table 2 ( Jung, 1933 ; Pittenger, 1993 ). Outputs from the assessment consist of a scoring regimen (0–100 scale) for each of CQ drive, knowledge, strategy and action with 3 or 4 sub-categories in each grouping. A reference scale is provided against worldwide norms for each category and sub-category, recorded as low (bottom 25%), moderate (middle 50%) and high (top 25%). The assessment comes with a workbook allowing respondents to develop and deploy strategies and tactics to address low scoring areas.

The roots of the culture value dimensions used in the CQS assessment instrument have origins in other models, including the PDI, IDV, UAI and LTO indices advanced in the Hofstede analyzes. Though necessarily inexact based on personal circumstances, environment and beliefs, the value dimensions have been mapped against the major cultural clusters into high, medium and low tendencies based on analysis of published studies ( Ng et al. , 2009 ; SHRM, 2015 ). The mere suggestion of potential differences across the dimensions and the purported range of preferences serves to raise awareness of cross-cultural complexities which can factor into team dynamics and signals the importance of CQ knowledge ( Figure 4 ).

The relative contributions of the four CQ dimensions to work-related functions have been investigated and highlight distinct relationships between components. Through consistent patterns, metacognitive CQ and behavioral CQ predict task performance, metacognitive CQ and cognitive CQ predict both cultural judgment and decision-making ability and motivational CQ plus behavioral CQ predict cultural adaptation. Accordingly, CQS assessment would seem particularly useful for members of newly formed culturally diverse teams, and for individuals relocating to a new (cultural) environment ( Ang et al. , 2007 ). More recent studies have attempted to correlate relationships between CQ and individual personality traits ( Lievens et al. , 2003 ). The prevailing taxonomy on human personality is commonly referred to as the “Big Five” model ( Murugesan and Jayavelu, 2017 ).

The big five model of personality

Extraversion (sociable, assertive, ambitious).

Agreeableness (friendly, trusting, cooperative).

Conscientiousness (responsible, organized, dependable).

Emotional stability (control, calm, secure).

Openness to experience (imaginative, inquiring, artistic).

As the Big Five model has been validated across cultures, there is a natural interest in associations between individual factors and the “four factors” of CQ dimensionality. Based on a number of studies in different settings, relationships have been correlated which allow connections between personality and cultural competence to be made ( Ang et al. , 2006 ). Such has far-reaching consequences, given the expanding diversity and mobility of the global workforce and may have special connotations within innovation teams ( Elenkov and Manev , 2008, 2009 ). Research has also been conducted to validate the correlations by studying team coaches ( Devin, 2017 ).

Conscientiousness and metacognitive CQ.

Agreeableness and emotional stability with behavioral CQ.

Extraversion with cognitive, motivational and behavioral CQ.

Openness with all four factors of CQ.

Assessing the composition of teams

The majority of projects conducted in the pharmaceutical industry are through divisional channels with personnel who were hired based on specific skill sets. Teams within these sub-organizations (often called line functions) will be pre-formed and ready to deploy or will assemble then disassemble as needed as projects are identified. Considerable effort has been devoted to our understanding of team dynamics and the contributions of individual members through the assessment of personality traits and modes of engagement. The origins of personality typing date back to the Greco-Roman era with the description of the “four temperaments” by Hippocrates (c.460–c.370 BC). According to this proto-psychological theorem, four medical determinants (sanguine, choleric, melancholic and phlegmatic temperaments) were assigned as personalities based on the relative prevalence of bodily fluids and the possibility of mixed categories advanced were personality types overlapped ( Merenda, 1987 ). Some 2,300 years later, application of personality classification and typing became of prime importance in the post-industrialized business world where tasks began to involve diverse teams of workers. One of the most widely used assessment tools is the Myers-Briggs type indicator (MBTI) which is designed to highlight specific personality factors, which may influence behavior in a team ( Jung, 1933 ). Based on the theories of Swiss psychologist Carl Jung the instrument provides an assessment of individuals’ preferred stances within team environments, with binary categorization in terms of attitudes ( I ntrovert/ E xtrovert), lifestyle ( J udging/ P erceiving) and functions ( S ensing/ I ntuition and T hinking/ F eeling) ( Pittenger, 1993 ). The various combinations of tetrads (16 total) are assigned monikers which serve as terms of reference for the individual and team members who will interact with the person ( Table 3 ). Of interest to innovation communities, it is suggested that Apple CEO Steve Jobs was an ENTJ (“Field Marshall”), Albert Einstein INTP (“Architect”) and Thomas Edison an ENTP (“Inventor”).

In terms of diversity elements, based on an analysis in >30 countries all of the type preferences (E/I, S/N, T/F and J/P) have been observed in each culture studied, however, distribution of the 16 types differ across cultures but retain patterns within these cultures. Across all cultures, (X)STJ is the predominant triad and men in each culture typically respond for T (c.f. F) at rates ranging from 10–25% higher than for female respondents ( Seegmiller and Epperson, 1987 ). Jung’s work also extended to the related DISC assessment tool, which scrutinizes four areas of behavior, namely, D ominance (in approach to problem-solving), I nfluence (approach to people), S teadiness (pace and attitude to change) and C ompliance (procedures, standards) ( Jones and Hartley, 2013 ).

Another popular assessment tool is the team roles system introduced by Belbin (2010) . The instrument is derived from analysis of clusters of behaviors and skills that are required to produce team results and is embodied in a total of nine teams “roles” which stem from three centricities, namely, thinking, action and people-oriented ( Table 4 ).

Belbin role assessment allows team members to identify their preferred roles in a team and also uncover inherent strengths, which they may be unaware of. Though no concrete correlations between the MBTI and Belbin system are evident, the use of the former to gain insight to personality factors and the latter for behavioral pointers has been advocated for effective team building ( Higgs, 1996 ). Although the Belbin and MBTI assessments provide useful pointers for the assembly and successful working of cross-functional teams, for innovation-centric programs the Four Sight Thinking Profile has gained popularity. Its basis is that four fundamental forms of thinking roles are used in creative processes (clarification, ideation, development and implementation) and the relative preferences for each allow categorization for team building ( Bratsberg, 2012 ). Team members develop a chart, plotting high and low preferences for each of the four categories, providing a holistic view on preferences and proclivities that the individual and team can use ( Figure 5 ). For individuals with a single high preference (against statistical means), they are assigned a designation from one of the four categories. Individuals with two or three high preferences are designated into sub-categories and were equivalent in all four categories, as an integrator ( Figure 6 ).

Similarly to other evaluative instruments, the Four Sight program provides participants guidance on the best mode of interaction with colleagues in each of the 15 possible categories, which can be pivotal for team building. For example, it is suggested that ideators who are often regarded as “spontaneous,” “imaginative” and “adventurous” should be afforded “constant stimulation,” “variety and change” and “scope to dream” by other teams members. Equally importantly, the instrument points to areas where ideators may cause friction for the team e.g. by drawing attention to themselves, being impatient or too abstract, allowing them to modify their approach. The utility of the instrument for innovation teams is underscored by the fact that two of the preferences (ideator, implementer) map directly to the two phases of innovation (initiation, implementation). In terms of relationships with other assessment tools, the communicating author recorded high preference as a driver under Four Sight, typed as ENTJ ( Field Marshall ) with Myers-Briggs and shaper with Belbin, suggesting action-oriented roles in all three.

While MBTI, Belbin and Four Sight represent assessment tools useful for team assembly and functioning, some other more reflective team profiles have also been advanced including the 9 innovation team personality types articulated by the Mayo Clinic Center for Innovation ( Figure 7 ) ( Van Wulfen, 2009 ). It is easy to recognize and identify with some of these characters, and many will map onto Belbin and MBTI profiles readily. In a similar vein and with a degree of comedic interpretation (inspired by characters in a children’s book series), in their award-winning innovation text The Corporate Startup , Viki, Toma and Gons identify eight innovation characters/caricatures which allow people to relate to Viki et al. (2017) . Though certain team members may naturally exude one such persona it is also an interesting proposition to have team members deliberately adopt one for the purposes of role-play discussion or order that all viewpoints represented by the characters are articulated and appreciated.

No discussion of team roles would be complete without mention of de Bono’s six hats ( Table 5 ). The so-called six thinking hats model is a tool to promote parallel then lateral thinking in groups and teams. Each imaginary hat ascribes a designated mindset of an individual, and discussions are choreographed by the wearer of the blue hat, who is the group/team controller ( Kivunja, 2015 ). On socializing the particular topic for discussion, the white hat bearer seeks to clarify information, the red hat bearer delivers an emotional response, the yellow hat bearer positive elements, the black hat bearer cautions and concerns and the green hat bearer creative opportunities. This can be an effective tool for entire teams to adopt a single hat/thinking mode (with the exception of blue which is singular) to align on parallel thinking and then be assigned assorted hats for lateral thinking. The added benefit of this approach is that if conducted with random assignments, individuals may be forced to act outside their comfort zones, promoting personal growth and empathy for team members with differing natural preferences.

The science of developing diverse innovation teams: the science of team science

Forming : The team is established using either a top-down or bottom-up approach.

Storming: Team members establish roles and responsibilities. This can often be the onset of turf battles as persons from diverse backgrounds exchange views through a combination of dialog and debate. If the pressure to reach consensus prematurely is avoided, this phase can be particularly creative as the full team is more likely to input.

Norming: Team members begin to work together effectively and efficiently, start to develop trust and comfort with one another and learn they can rely on each other.

Performing: The team works together seamlessly, focuses on a shared goal and efficiently resolves issues or problems that emerge.

Teams may come to a natural end. The team’s dissolution should be celebrated and the accomplishments recognized and rewarded.

The team may take on a new project with a new goal, applying its ability to work together to solve a new problem.

Absence of trust.

Fear of conflict.

Lack of commitment.

Avoidance of accountability.

Inattention to results.

Within these, fear of conflict is often seen as the most pervasive and insurmountable issue. On any challenging project, the team will be continually exchanging viewpoints from differing perspectives and vulnerability and trust are key issues that need to be addressed. Individuals have widely differing approaches to conflict resolution, and the Thomas-Kilmann Conflict Mode Instrument was developed to help team members identify their most natural style. The five styles categorized are, namely, competing, accommodating, avoiding, collaborating and compromising ( Thomas and Kilmann, 1974 ). Another key success factor for teams is to understand and navigate the boundaries of dialog and debating schemas ( Table 6 ). As articulated by Berman, very different drivers are associated with each and recognizing these behaviors upfront can allow a team to steer clear of potential conflict forming activities ( Berman et al. , 1997 ). Collectively, these SciTS learnings have been found to be equally applicable from fundamental through to translational research and have become recommended reading for any cross-functional and/or diverse team ( NIH, 2010 ).

Equipping innovation teams for success

The process of innovation has been described using a variety of terms, but within the context of the pharmaceutical industry, we refer to the ideation, design, initiation and subsequent implementation of novel scientific and technological approaches for the development of new products. Innovation within the industry is typically confined to a restricted number of products, which vary from company to company based on expertise, therapeutic areas and collaborative agreements and the products themselves can be either branded or generic. In the strictest sense, it has been argued that the business does not routinely engage in white space or open innovation and instead largely innovate in areas of competence and familiarity ( Nelson, 1991 ). However, from time to time there are groundbreaking advances that open new avenues in health-care and disrupt the industry e.g. life-saving gene therapies, CAR-T immunotherapies and drug-free all digital therapies which were introduced in the past few years alone. What is well understood within organizations, however, is that competition is ever-present and the discovery, production and management of new medications represents a global challenge that requires continuous forms of innovation throughout the organization. For this reason, organizations study the structure, formation, operation and performance of teams very closely to derive maximum benefit. Measuring the outputs of innovation within a team can sometimes be challenging given the incubation period for marketed products can often exceed a decade, by which time a team’s composition will have changed many times. Another more focused approach to innovation within the industry can be to deliberately establish designated innovation teams assigned to tackle specific problems rapidly. In this case, there is a degree of control that can be exerted in the selection of the team, and it is commonly recognized that the diversity of the team (across multiple dimensions) leads to myriad benefits. Fortunately, the modern global pharmaceutical industry is blessed with a highly diverse workforce, making individual team diversity a routine expectation. Our interest and motivation behind the writing of this review are to begin to understand how aspects of team diversity benefit innovation teams. In this context we refer to teams, which have been assembled to execute on a project within a fixed time period, and where the expected outputs will include generation of new knowledge, reducing to practice a new process or product or development of proprietary principles. In each case, a metric could be a generation of a patentable idea, trade secret or publishable concept related to a product intended to enter the marketplace. The recent reports on the correlation between a team’s cultural diversity and higher innovation performance (BCG, 2018; Bertelsmann, 2018 ; Kaasa and Vadi, 2010 ) are intriguing and are readily relatable. Teams composed of members from diverse backgrounds may approach problems from different perspectives and have different tolerances for risk-taking, both of which are essential attributes needed in creative, innovative teams. A corollary exists, however, in that the more diverse the team, the more potential for culturally inspired misunderstandings to occur, which may be exacerbated under conditions where creative tensions are heightened and time constraints are omnipresent. Accordingly, it is likely that a study of dynamics and operating principles can benefit the entire team, and thus forms a substantial component of this review. Equally importantly, many scientists and engineers will be unaware of the cultural origins of different decision-making processes or communication preferences which over time might be detrimental to the team. For teams established over a long period, it could be expected that members learn each other’s preferences, proclivities and idiosyncrasies which attenuates the potential for conflict. In contrast, a freshly formed culturally diverse (innovation) team might need to adapt very quickly, underscoring the need for active assessment and coaching during the onboarding process.

Many of the excellent tools and approaches described herein can provide key learnings for teams and offer unique perspectives tailored to individual circumstances. Through a series of systematic evaluations of the tools and instruments described herein, our internal innovation program selected the CQS assessment, FourSight preference and SciTS framework for deployment in innovation teams ( Jones et al. , 2020 ). They are being made available to all newly formed teams, actively supported by coaches who are versed in deploying their learnings in mentoring activities and initial results are encouraging ( Jones et al. , 2020 ). The formation and normalizing of an innovation team represent two important phases in its development, but it is also imperative that the team’s operating principles are appropriate. For any innovation team, openness, trust, candor and psychological safety are pre-requisites for success and to monitor the health of the team an anonymous/confidential scorecard tool is advocated ( Figure 8 ). Adapted from SciTS principles, this is used to record progress or signal advanced warnings at specific intervals during the project, allowing intervention by the assigned coach if necessary ( Jones et al. , 2020 ). Aggregate analyzes from these surveys (issued with regular frequency) are shared with teams with emphasis placed on driving to full inclusivity for all team members. We believe with these guidance teams have the maximum chances of success and a framework is in place to monitor impact over extended periods and multiple cycles. We intend to report the long term findings and implications from these studies in due course ( Jones et al. , 2020 ).

Conclusions and implications

A considerable body of literature supports the notion that cultural diversity in teams correlates with improved innovation performance. Creative tensions in these teams need to be managed appropriately and numerous excellent instruments and strategies are available to leaders. Ideally, these should include cultural assessment (awareness and competence), team dynamics (individual and team integration) and inclusive and transparent operating principles grounded in team science methodology. Systematic analysis using appropriately powered studies and controls will ultimately help quantitate the impact of various components in innovation teams and across programs, although initial observations from our internal innovation program are encouraging ( Jones et al. , 2020 ). Such learnings could then be used to inform and guide team development and ultimately allow correlation of diversity elements with predictive outcome metrics. The high levels of cultural diversity in the global pharmaceutical industry make it ideally suited to study these key topics. Another principle to study is whether the behaviors learned in diverse innovation teams are then transferred to new teams that the individuals participate in. Equally interesting is to study whether diverse, established teams diminish their innovative capacity over time due to a normalization process. This could lead to the concept of regular rotations through different teams helping maximize the impact and learnings. With the steady globalization of industries and the increasingly diverse workforce, studies of this nature can play an important role in the success of innovation programs. Scientists, engineers and technologists may seldom read the social science or management literature, but the availability of intuitive tools and instruments to empower their teams to success will ensure continual progress is made. Finally, successful adaptation to remote working conditions mandated by social distancing requires consideration of intra- and inter-team dynamics and the learnings can provide additional benefit for innovation teams operating virtually for extended periods.

Cultural Dimension maps for the six most populous nations plus Switzerland

Cultural Relationships to Communication Preferences proposed by Hall ( 1977 )

Components of the CQS Profile developed by the Cultural Intelligence Center

A total of 10 culture value dimensions used in CQS assessment

Specimen Four Sight thinking preferences plot

The 15 Four Sight Thinking Profiles

Hypothetical Team Characters from the Mayo Clinic CFI (left) and The Corporate Startup (right)

Team Performance and Inclusivity Tracking Tool

% Leadership team appointments needed to effect a 1% increase in innovation revenue

The 10 largest cultural groupings globally

The 16 Myers-Briggs type indicators

The nine Belbin team roles

The six hats of de Bono

The dialog and debating schemas articulated by Berman (Berman et al. , 1977)

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Acknowledgements

The authors wish to thank Elena Rodriguez, Anastacia Awad, Ivonna Demme, Nancy Long, Christian Pihlgren, Unmesh Deodhar, Rahul Sharma and Clara Fernandez de Castro for inputs on the manuscript.

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New survey reveals $2 trillion market opportunity for cybersecurity technology and service providers

As the digital economy grows, digital crime grows with it. Soaring numbers of online and mobile interactions are creating millions of attack oppor­tunities. Many lead to data breaches that threaten both people and businesses. At the current rate of growth, damage from cyberattacks will amount to about $10.5 trillion annually by 2025—a 300 percent increase from 2015 levels. 1 Steve Morgan, “2022 Cybersecurity Almanac: 100 facts, figures, predictions, and statistics,” Cybercrime Magazine , January 19, 2022.

In the face of this cyber onslaught, organizations around the world spent around $150 billion in 2021 on cybersecurity , growing by 12.4 percent annually. 2 Growth is compounded. However, set against the scale of the problem, even this “security awakening” is probably insufficient. A survey of 4,000 midsized companies suggests that threat volumes will almost double from 2021 to 2022. 3 The biggest cyber security threats coming in 2022 , Coro. According to the survey, nearly 80 percent of the observed threat groups operating in 2021, and more than 40 percent of the observed malware, had never been seen previously. These dynamics point to significant potential in an evolving market. Currently available commercial solutions do not fully meet customer demands in terms of automation, pricing, services, and other capabilities—which this article will explore in further detail. As a result, the gap today between the $150 billion vended market and a fully addressable market is huge. At approximately 10 percent penetration of security solutions today, the total opportunity amounts to a staggering $1.5 trillion to $2.0 trillion addressable market (Exhibit 1). This does not imply the market will reach such a size anytime soon (current growth rate is 12.4 percent annually off a base of approximately $150 billion in 2021), but rather that such a massive delta requires providers and investors to “unlock” more impact with customers by better meeting the needs of underserved segments, continuously improving technology, and reducing complexity—and the current buyer climate may pose a unique moment in time for innovation in the cybersecurity industry.

The underpenetration of cybersecurity products and services is, on the face of it, the result of the below-target adoption of cybersecurity products and services by organizations—which suggests that the budgets of many if not most chief information security officers (CISOs) are underfunded. Cyber­security providers must meet the challenge by modernizing their capabilities and rethinking their go-to-market strategies.

To maximize the opportunity, providers must get a grip on the factors shaping the market, the segments most likely to grow, and the services customers need. Here we set out four areas likely to be the focus of such discussions: cloud technologies, pricing mechanisms, artificial intelligence, and (particularly in the midmarket) managed services. With strategic planning in these areas, and a robust approach to implementation, cybersecurity providers can make themselves more competitive and get a slice of the $2 trillion pie.

Growing cybermarket potential

Why does the cybermarket offer such significant potential right now? We see five key drivers.

More attacks targeting smaller companies

From a demand perspective, fast-growing smaller organizations are exposed to proliferating digital touchpoints and ecosystem relationships. In addition, malware such as ransomware can pose an existential threat to small and midsize businesses (SMBs) and midmarket companies in a way it often doesn’t to large enterprises. What might remain a silent breach at a larger organization is often a significant, overt disruption at a smaller one. For example, a Texas-based midsize steel structure manufacturer was forced into bankruptcy in May 2019 when ransom­ware permanently encrypted both its tooling and financial accounting software. Ransoms can be out of reach, while information retrieval and recovery services are timely and difficult. Moreover, the trust of customers can prove difficult to recover once a company has been breached. In fact, according to previous McKinsey research on the importance of digital trust, in the past 12 months nearly 10 percent of respondents reported stopping business with a supplier after learning of a data breach.

Midmarket entities are often targeted by criminals looking to exploit unsophisticated security tooling. These companies, for example, may miss threats such as EternalBlue, an exploit developed by the US National Security Agency and later used by Wannacry ransomware. Many smaller entities use a single-backup strategy, which can leave them susceptible to attacks from ransomware such as PureLocker.

The proliferation of ransomware attacks targeting SMBs and midmarket companies means that even those that don’t currently employ or engage a security team have a responsibility to act. Fortunately, the SMB segment is becoming truly addressable by cybersecurity products and services for the first time, thanks to emerging economies of scale.

The impetus from regulation

At least 45 states and Puerto Rico introduced or considered more than 250 bills or resolutions that deal significantly with cybersecurity. 4 Cybersecurity Legislation 2021, National Conference of State Legislatures, July 1, 2022. Federal initiatives include the US National Defense Authorization Act, Executive Order 14028, 5 Improving the Nation’s Cybersecurity: NIST’s Responsibilities, May 2021. and the extension of the False Claims Act to include the misrepresentation of an organization’s cybersecurity program and qualifications.

Based upon McKinsey’s client conversations, federal cybersecurity contracting requirements are trickling down to thousands of SMB and midmarket contractors. The US Securities and Exchange Commission (SEC) is discussing new rules on breach notifications. Compliance challenges grow more onerous as ecosystems proliferate. The Department of Defense’s Cybersecurity Maturity Model Certification (CMMC), for example, underscores the critical importance of holistic cybersecurity, much of it beyond the reach of SMBs and the mid­market unless they get help from vendors.

Rules around the world are equally stringent. The European Union’s General Data Protection Regulation, for example, may levy fines of up to 4 percent of global turnover against companies that fail to protect their customers. 6 An earlier version of this article incorrectly stated that the European Union's General Data Protection Regulation may levy fines of up to 2 percent of global turnover, when 2 percent only represents the possible fine for “less severe” violations. The “most severe” violations may fine up to 4 percent of revenue.

CISOs are as serious as ever about closing the (log) visibility gap

Moves to ramp up log processing are critical because just three years ago the average enterprise saw only 30 percent of what was happening. Finding more needles in the haystack will probably require more commitment—in particular, in areas such as AI, which can spot cyberthreats and malicious activities. For providers, AI will force a rethinking of technology and how they bring it to market.

Over the past three years, companies have boosted their share of total log volume visibility from about 30 percent to about 50 percent on average and are pushing toward 65 to 80 percent over the next three years (Exhibit 2). 7 McKinsey Cyber Market Map Survey. SMBs and the midmarket have been slightly more active than larger enterprises, and future growth in visibility use cases is predicted to be stronger among these smaller companies. SMBs expect to widen their deployment of end point detection and response (EDR) tooling, to use single panes of glass that ingest and monitor their cloud environments, and to rely on managed-service partners (such as providers of managed detection and response services) for more sophisticated activities.

A surprising aspect of the current market landscape is the significant extent to which the slowest-moving enterprises are trailing their faster-moving peers. Bottom-quartile enterprises report lifting their log volume visibility by just 6 percent over the past three years and forecast a meager 5 percent rise in the next three. By comparison, the best performers, particularly in the SMB segment, increased their log coverage by between 25 and 35 percent in the past three years and plan to accelerate those efforts over the next three.

Talent shortages and service offerings

An existing global cyber-talent shortage, com­pounded by the intensification of digital threats like ransomware during the COVID-19 pandemic, has created further growth opportunities for service providers as CISOs and talent partners struggle to fully staff their organizations. Structural dynamics are also boosting demand for vended solutions. As companies build out their protections, buyers increasingly expect products to come bundled with offerings that ensure both short-term services (for instance, implemen­tation) and long-term ones (ongoing security).

A global cybersecurity talent shortage means that IT leaders often have little choice but to do business with third-party service partners.

The bottom line? Across all segments, forecasted changes in allocated security spending is increasing as a percentage of services between internal and third-party services. So long as talent remains a problem, outsourced services will be essential for companies that need to support strong security outcomes.

Higher levels of customer engagement

Until recently, many organizations that required cyber protection were not fully engaged with the challenges they faced. Often, they saw the cost and complexity of action as greater than the need for it. Now, with attacks becoming more frequent, the risk–benefit equation has changed. With security and privacy concerns being elevated to the C-suite across industries, geographies, and enterprises whatever their size, both providers and investors have opportunities. We see potential for innovation in prices and bundles, geographic coverage, target customer groups, integration, and off-the-shelf analytics.

Providers can excel on four fronts

To gauge the market opportunity, McKinsey used a bottom-up model: an assessment of key players and validation against industry logic and our conversations with clients. We also surveyed 500 cybersecurity buyers and interviewed 50 market-leading vendors. The combined insights, tracked in McKinsey’s Cyber Market Map, show that spending on products and services from vendors is set to rise 13 percent annually up to 2025—a significant uptick from 10 percent growth over the past three to five years. Key changes to previous market forecasts include not only faster growth, with services increasing much faster than products, but also a significant opportunity in the SMB segment.

For providers, the message is clear. Current market dynamics give them a chance to boost their penetration of both existing accounts and the unvended space. This growth will be spurred by an evolving threat landscape and talent shortages—a gap of at least 600,000 in the United States alone. 8 Olivia Rockeman, “Hackers’ path eased as 600,000 US cybersecurity jobs sit empty,” Bloomberg, March 30, 2022. To maximize the opportunity, we see potential for action on four fronts.

Ride the coattails of the cloud transformation

Public-cloud migrations will continue to define enterprise technology strategies for the next several years (Exhibit 3). Providers (especially product providers) should thus consider not only accommo­dating but also specializing in hybrid and multicloud architectures.

Where cloud providers offer cybersecurity solutions, the tooling on offer in many cases is not a compre­hensive substitute to the capabilities of cybersecurity specialists—at least in the enterprise segment. Organizations that adopt multicloud strategies or maintain critical on-prem workloads will in all likelihood persistently need best-of-breed solutions. The challenges that vendors are expected to help resolve include ease of implementation, day-to-day ease of use, integration and coverage across environments, and agility and flexibility in attack environments. If information about an attack detected in one cloud provider environment is not conveyed immediately to other cloud environments, for example, that lapse would amount to a tooling failure.

Organizations that adopt multicloud strategies or maintain critical on-prem workloads will in all likelihood persistently need best-of-breed solutions.

In many security-related markets, characterized by large numbers of tools, entire categories of orchestration players (such as those that orchestrate security and the identity of users) have been created to simplify the combination of parallel processes. Antifraud programs, for instance, require so many different sets of tooling to manage different geographies that a new category has emerged to manage workflows. In another example, in the cloud, orchestration coordinates workflows and the deployment and management of data across multiple public and private clouds, software-as-a-service (SaaS) providers, managed data centers, and on-prem infrastructure enterprises. All of these demands for increased visibility are potential entry points for providers.

Finally, regulation also creates a cloud-related opportunity for providers. Highly regulated verticals are migrating to the cloud about four times more quickly than low-regulated verticals are. This could help unlock new markets, particularly in highly regulated Europe, and be a key differentiator for multinationals that must navigate complex cross-border data flows, local regulations and data sovereignty, and geopolitical issues that spike cyber and data risk.

Create a pricing model for the midmarket

Many cyber solutions are mispriced for SMBs. Larger organizations can pre-pay or buy in bulk to obtain volume discounts, but many SMBs and midmarket companies are less able to negotiate hard for these services. Large enterprises have an abundance of metrics, historical data, and reference points. SMBs and midmarkets, however, often lack information on how much they and others have spent. Consumption-based pricing models (for example, per gigabyte) can add flexibility but also risk: if an organization doesn’t know what good security looks like, will it burn through its budget just looking for needles in haystacks? Instead, customers increasingly reward vendors that use outcome-based or more “plannable” pricing models, such as per workload.

One cause of the pricing mismatch is simple economies of scale. SMBs and midmarket companies have a smaller base of employees over which to spread cyber-tooling costs, so they face a decision: either pay a disproportionate price per employee—by a factor of three to five or more than larger companies do, depending on the tooling category—or forego some security controls entirely.

Better automation, AI, and machine learning

The steepest innovation curve is for developing the brains of next-gen products and managed security services. Fully autonomous intelligent cyber-defense platforms (for example, end-to-end automated SIEM/SOAR 9 Security orchestration, automation, and response (SOAR) and security, information, and event management (SIEM). detection and response pipelines) are challenging to engineer and validate to the point where they are fully trusted by operators. Providers should therefore strive to enable high-fidelity assisted intelligence that makes human analysts more efficient be it through leveraging advanced analytics or building tight integrations with other security platforms (Exhibit 4).

Many next-gen algorithms for AI and machine learning (ML), while not yet ready for autonomy, are getting close. Rule libraries are increasingly refreshed from open sources and built on common standards, such as Yara. Eventually, one human being, operating as a remote or virtual resource to serve multiple companies, will reduce the cost of MDR solutions and boost the margins of providers.

To reach this target state of optimized low-cost services, managed-service providers can focus on the brains of next-generation security products by concentrating innovation in areas such as data source integration and neural/logic engines. Enhancing and building data source integrations could yield indirect revenue opportunities and widen access to larger ecosystems—for example, as part of an open extended detection and response (XDR) concept. Spreading investment in neural/logic engines across both cutting-edge AI and static rules libraries will ensure that R&D efforts are measurably productive.

Expand managed services and create a midmarket-friendly solution

Demand for full-service offerings is set to rise by as much as 10 percent annually over the next three years. Providers should thus seek to develop bundled offerings that take advantage of hot-button use cases. And they ought to focus on outcomes, not technology.

A potentially rewarding approach would be to adopt co-creative models with managed-service providers (MSPs) to build workbench solutions. This would require investments in R&D and development tooling (for example, APIs) that allow MSPs to connect your platform to theirs rather than the other way around. Partnering will make it possible to create centers of excellence, which will lead to faster implementation and more efficient operations. The resulting improvement in customer outcomes will feed into the performance metrics of providers, and a more robust service layer will create a runway to master product market fit.

Rather than the common laundry list approach, vendors should adopt a clear MSP partnership strategy. Where necessary, they should invest in building collaborative sales capabilities with their partners. (In several cyber-partner programs, 20 percent of the partnerships generate 80 percent of the partners’ revenues.) Finally, vendors must articulate industry-specific use cases with tweaks to their products’ user interfaces and user experi­ences, as well as potential MSP and partner channel sales and marketing.

Winning companies will work with SMB-focused channel partners and optimize their marketing. That approach could involve partnerships with small-business software providers (such as tax prep software and cloud email and storage) and with vertical SaaS providers (such as payroll management and point-of-sales services). In some cases, it will make sense to replatform offerings as lighter-weight SaaS-first solutions, catering to buyers already deep in the trenches of SaaS transformations in other enterprise applications and platform realms.

The continuing digitization of the global economy, ever-increasing numbers of cyberattacks, and regulatory pressure on companies to protect their data present cybersecurity providers with a compelling opportunity. Amid talent deficits and the desire to boost log visibility, SMBs and midmarket players in particular are focused on implementing more advanced solutions.

With billions of dollars of revenues set to flow into the market in the next three years, providers should seize the moment. That means optimizing engage­ment with the cloud, developing a pricing model for the midmarket, embracing innovation, and expanding managed-service offerings to create midmarket-friendly solutions. In short, it means finding productive combinations of product, price, and services that vendors can tailor to target segments and are flexible enough to scale. If the industry can meet these priorities, it can start to create the momentum that will increase its penetration across segments and put the $2 trillion prize in play.

Bharath Aiyer is an associate partner in McKinsey’s Southern California office; Jeffrey Caso is an associate partner in the Washington, DC, office; Peter Russell is a consultant in the New York office; and Marc Sorel is a partner in the Boston office.

The authors wish to thank Hannah Chen, Bartlomiej Kazimierski, and Kevin Telford for their contributions to this article.

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