Impacts of Culture on Innovation Propensity in Small to Medium Enterprises in Construction

Abstract

Research suggests that the cultural context in which a business operates influences the level of innovation. However, research on the links between cultural factors and innovation in construction remains limited. The aim is to examine the underlying relationships between cultural factors and innovation propensity in small to medium enterprises (SMEs) in the construction sector. Innovation propensity is the degree to which an organization is inclined to achieve a state of innovativeness by design. In contrast, cultural factors manifest through the beliefs and values related to the various organizational aspects. The theoretical model and, subsequently, the survey instrument were developed from a review of the literature. The model was tested using survey data from SMEs in a regional area of Australia. The partial least squares-structural equation modeling (PLS-SEM) technique was employed to test the model. The results suggest that cultural factors account for 41% of the variance in innovation propensity. Specifically, market orientation focused on dealing with competitors had the strongest influence on innovation propensity. Other factors include business relationships based on trust and workforce capacity acquired through regular technology development for solving problems. However, the role of leadership, especially concerning championing projects, does not have a statistically significant impact on innovation propensity. A large proportion of construction SMEs, specifically in regional areas, will have a relatively small number of employees (up to four) and a flat organizational structure that reflects a short-term business orientation. In this context, the cultural notion of leadership does not have a significant direct relationship on innovation propensity. Therefore, policies encouraging market orientation, building relationship networks, and expanding workforce capabilities might be more effective in improving innovation propensity in construction SMEs than policies directly and solely focused on developing leadership skills.