Management innovation

MANAGEMENT INNOVATION

JULIAN BIRKINSHAWGARY HAMEL

London Business School

MICHAEL J. MOLUniversity of Reading

We define management innovation as the invention and implementation of a man-agement practice, process, structure, or technique that is new to the state of the artand is intended to further organizational goals. Adopting an intraorganizationalevolutionary perspective, we examine the roles of key change agents inside andoutside the organization in driving and shaping four processes—motivation, inven-tion, implementation, and theorization and labeling—that collectively define a modelof how management innovation comes about.

Over the past half-century, scholars aroundthe world have produced a vast body of aca-demic research and writing on innovation.While most of this research has focused on var-ious aspects of technological innovation (e.g.,Henderson & Clark, 1990; Utterback, 1994), thetrend over the last fifteen years has been towardexploring other forms of innovation, such as pro-cess innovation (e.g., Pisano, 1996), service inno-vation (e.g., Gallouj & Weinstein, 1997), and stra-tegic innovation (Hamel, 1998; Markides, 1997),with a view to understanding how they are man-aged and how they contribute to long-term firmsuccess.

The focus in this article is on a relatively under-researched form of innovation—managementinnovation—and particularly the processesthrough which it occurs. We apply a relativelynarrow definition of management innovation—specifically, the invention and implementationof a management practice, process, structure, ortechnique that is new to the state of the art andis intended to further organizational goals.While many of the landmarks of managementinnovation are familiar to every businessscholar (e.g., GE’s development of the modern

research lab and GM’s invention of the M-formorganization structure), the amount of detailedknowledge about how management innovationis actually implemented is limited.

In its broadest sense, management innova-tion has, of course, received considerable re-search attention over the years. As we discussin the following section, there are four keyperspectives in the literature: (1) an institu-tional perspective that focuses on the socio-economic conditions in which new manage-ment ideas and practices take shape (e.g.,Guillen, 1994); (2) a fashion perspective thatfocuses on the dynamic interplay between us-ers and providers of management ideas (e.g.,Abrahamson, 1996); (3) a cultural perspectivethat focuses on how an organization reacts tothe introduction of a new management prac-tice (e.g., Zbaracki, 1998); and (4) a rationalperspective that focuses on how managementinnovations—and the individuals who drivethem— deliver improvements in organization-al effectiveness (e.g., Chandler, 1962). There isalso a related body of literature concernedwith the subsequent diffusion of managementinnovations across industries or countries(e.g., Guler, Guillen, & MacPherson, 2002). Butuseful as these bodies of literature are, theyhave surprisingly little to say about the gen-erative mechanisms by which new manage-ment ideas are first created and put into prac-tice. To state the point slightly differently, ourunderstanding of the processes of manage-ment innovation is currently very limited and

We thank Jos Benders, Rick Delbridge, Hakan Ener, Mar-tine Haas, Michael Jacobides, Robert Kaplan, Olav Soren-son, Yiorgos Mylonadis, and seminar participants at LondonBusiness School, INSEAD, HEC (Paris), Imperial College, andKing’s College. Earlier versions of this research were pre-sented at the 2005 European Group for Organizational Stud-ies conference and the 2006 annual meeting of the Academyof Management.

� Academy of Management Review2008, Vol. 33, No. 4, 825–845.

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is based largely on a few well-known exam-ples, such as Chandler’s (1962) documentationof the emergence of the M-form structure. Whatis required—and what we provide a first steptoward in this article—is a systematic andgrounded process theory of how managementinnovation transpires.

We focus on the specific actions individualsinside or outside the firm might undertake thatlead to the emergence of a management inno-vation—what we might call “management in-novating,” as a way of capturing the poten-tially critical role of human agency in theprocess. We address two specific questions.First, what is management innovation? Howcan we define management innovation in auseful and rigorous way that emphasizes itsdistinctiveness? Second, and building on thefirst question, what are the processes throughwhich management innovation comes about?What does the literature tell us about the typ-ical sequence of actions followed by individ-uals inside and outside the organization thatresult in the creation of management innova-tion? And to what extent can we induce ageneral set of arguments about the causalmechanisms through which management in-novation takes place? The article concludeswith some thoughts about the future researchagenda that might be pursued to further ad-vance our understanding of management in-novation.

WHAT IS MANAGEMENT INNOVATION?

Management innovation involves the intro-duction of novelty in an established organiza-tion, and as such it represents a particular formof organizational change. In its broadest sense,then, management innovation can be defined asa difference in the form, quality, or state overtime of the management activities in an organi-zation, where the change is a novel or unprece-dented departure from the past (Hargrave & Vande Ven, 2006; Van de Ven & Poole, 1995: 512). Onthe basis of this high-level definition, we iden-tified four distinct perspectives on managementinnovation in the literature, as summarized inTable 1. These four should be seen as the dom-inant perspectives around which research hasclustered in the past, rather than as theoreti-cally comprehensive in terms of the domain thatthey cover. Our approach draws to some degree

on insights from all four perspectives but relatesmost closely to the rational perspective.

Four Perspectives on Management Innovation

Proponents of the institutional perspectivetake a macrolevel and comparative approach tomake sense of the institutional and socioeco-nomic conditions in which particular manage-ment innovations emerge. For example, Guillen(1994) examined the impact of seven sets of in-stitutional factors on the introduction of newmanagerial ideologies and techniques acrossfour countries; Cole (1985) focused on how thebalance between labor market incentives thatare mostly set by the state, the relative strengthof industry associations, and the predispositionof organized labor influenced the introduction ofsmall-group activities in different countries; andKossek (1987) examined industry- and firm-levelinfluences on the emergence of human resourcemanagement innovations. Normative beliefsabout what is progressive may drive manage-ment innovation, but those beliefs are also sub-ject to long Kondratieff waves of economicchange in which new technologies occur andcreate performance gaps that then necessitatemanagement innovation (Abrahamson, 1997;Barley & Kunda, 1992). The institutional perspec-tive measures innovation in terms of the dis-course around particular ideologies and also atthe level of specific practices or techniques. Itgives no direct consideration to the role of hu-man agency in shaping the process; instead, itfocuses on the preconditions in which an inno-vation first emerges and then the factors thatenable industries to adopt such innovations.

The fashion perspective focuses on how man-agement innovations emerge through the dy-namic interplay between the managers who usenew management ideas and the “fashion set-ters” who put forward those ideas (Abrahamson,1991, 1996). This perspective provides a wealth ofinsight into how management fashions takeshape, including a detailed understanding ofthe typical attributes of managers who buy intothese fashions (Gill & Whittle, 1993; Huczynski,1993; Jackson, 1986), as well as the ways in whichfashion setters shape incipient demand for theirideas (Benders & van Veen, 2001; Clark, 2004;Kieser, 1997; Mazza & Alvarez, 2000). However, ithas little to say about the true origins of man-agement fashions, or why certain innovations

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become fashions while others do not. The fash-ion perspective spans the macro and micro lev-els of analysis, with a concern both for the in-dustry that supplies new management ideasand for the behavioral reasons why individualmanagers choose to buy into those ideas. Man-agement fashions can exist as abstract ideas orrhetorics, or as specific practices or techniques.

Proponents of the cultural perspective attemptto understand how management innovationshapes, and gets shaped by, the culture of theorganization in which it is being implemented. Itoperates at the meso level of analysis by look-ing at how individual attitudes toward manage-ment innovation interact with the organization-

level introduction of the innovation. One strandof this literature takes a critical perspective(Knights & McCabe, 2000; McCabe, 2002) whilethe other adopts an intraorganizational processperspective (Stjernberg & Philips, 1993; Zbaracki,1998), but both share some common themes: arecognition that established organizations donot change easily, that management innovationhas both rhetorical and technical components,and that the outcome of the introduction of amanagement innovation is rarely what was in-tended by the senior executives who introducedit. Unlike the two previous perspectives, the cul-tural perspective provides some insight intohow management innovations are imple-

TABLE 1Key Features of Four Perspectives on Management Innovation

FeaturesInstitutionalPerspective Fashion Perspective Cultural Perspective Rational Perspective

Representativepapers

Barley & Kunda(1992), Bendix(1956), Cole (1985),Guillen (1994),Kossek (1987),Strang & Kim(2005), Weitz &Shenhav (2000)

Abrahamson (1991,1996), Abrahamson& Fairchild (1999),Clark (2004),Huczynski (1993),Kieser (1997), Mazza& Alvarez (2000),Staw & Epstein(2000)

Gill & Whittle (1992),Knights & McCabe(2000), Knights &Murray (1994), McCabe(2002), Stjernberg &Philips (1993), Zbaracki(1998)

Alange, Jacobsson, &Jarnehammar (1998),Chandler (1962),Damanpour (1987),Kaplan (1998),Kimberley &Evanisko (1981),Tichy & Sandstrom(1974), Yorks &Whitsett (1985)

Core question What institutionalconditions giverise to theemergence anddiffusion ofmanagementinnovations?

How do aspects of thesupply of anddemand for newmanagement ideasaffect theirpropagation?

How do managementinnovations shape,and get shaped by,cultural conditionsinside anorganization?

What is the role ofmanagers ininventing andimplementing newmanagementpractices?

Key factorsinfluencingtheinnovationprocess

Institutionalconditions andattitudes of majorgroups ofinfluencers

Suppliers of newideas and thelegitimacy of theirproposals

Culture of theorganization in whichthe innovation isintroduced

Actions of keyindividuals drivingthe process insideor outside theorganization

Role of humanagency indriving theprocess

Rarely discussed Rarely discussed Agents are important butconstrained by powerrelations andtraditions

Agents initiate anddrive the processwithin an organiza-tional context

Level ofanalysis

Firm plus industry/country

Firm plus market fornew ideas

Firm plus individual Individual plus firm

Process ofchange andoutcome ofinnovation

Progressive changesin managementideology and/orpractice,sometimes towardmore effectiveways of working

Cyclical process ofhype thendisillusionment; noevidence thatinnovation leads tolong-term benefits

Socially constructedchange process;usually very littlechange in way ofworking andperpetuation ofexisting powerrelations

Progressive changesin managementpractice towardmore effective waysof working; successnot guaranteed

2008 827Birkinshaw, Hamel, and Mol

mented, though primarily from the point of viewof those who are being asked to participate inthe process, rather than those who are driving it.The outcome of management innovation accord-ing to this perspective is typically a reinforce-ment of the status quo (McCabe, 2002). This per-spective does not deny that changes can occuras a result of management innovation, but theforces at work in large organizations typicallydampen its impact.

The rational perspective builds on thepremise that management innovations are in-troduced by individuals with the goal of makingtheir organizations work more effectively. Ac-cording to this perspective, an individual putsforward an innovative solution to address a spe-cific problem that the organization is facing, andhe or she then champions its implementationand adoption (Burgelman, 1983; Howell & Hig-gins, 1990). Some studies from this perspectivehave favored a case study methodology (e.g.,Chandler, 1962; Tichy & Sandstrom, 1974),whereas others have used large-sample quanti-tative approaches (Damanpour, 1987; Kimberly& Evanisko, 1981), but all studies span the micro-macro levels of analysis by focusing on the ac-tions of key individuals within an organizationaland environmental context. There is also a sub-theme within this perspective concerned withthe links between management and technolog-ical innovation, which suggests that they maycoevolve (Damanpour & Evan, 1984; Ettlie, 1988;Georgantzas & Shapiro, 1993).

An Operational Definition of ManagementInnovation

This review of the literature highlights thevery different approaches researchers haveused to make sense of the phenomenon of man-agement innovation, and it helps us to focus onthree key questions that arise as we seek todevelop an operational definition.

First, what exactly is being innovated?There is little consistency in the terminologywithin or across the four perspectives, but webelieve it is useful to separate out two levelsof analysis. At the more abstract level aremanagement ideas, defined by Kramer as“fairly stable bodies of knowledge about whatmanagers ought to do. . . . a system of assump-tions, accepted principles and rules of proce-dure” (1975: 47). Examples of management

ideas are scientific management, total qualitymanagement (TQM), and the learning organi-zation. While not identical, this concept of amanagement idea is comparable to Guillen’s(1994) notion of an organizational ideology,along with Barley and Kunda’s (1992), Abraham-son’s (1996), and Suddaby and Greenwood’s(2005) notions of management rhetoric.1 At themore operational level we can identify man-agement practices, management processes,management techniques, and organizationalstructures2 (Alange et al., 1998; Guillen, 1994)as different facets of the rules and routines bywhich work gets done inside organizations (forthe sake of readability, we use the term man-agement practices throughout the remainderof the article to cover this full range of activi-ties). In definitional terms this article focuseson management innovation at the operationallevel—that is, in terms of the generation andimplementation of new practices, processes,structures, or techniques— because this is thelevel at which observable changes take placein the way work is done and the managementinnovation process can be witnessed. But, aswill become clear, there is an important inter-action between the development of new man-agement practices and new managementideas, so our theoretical arguments will givedue consideration to both levels of analysis.

Second, how new does an innovation have tobe? There are two equally valid points of viewin the literature. Abrahamson (1996) and Kim-berly (1981) define an innovation as “new tothe state of the art,” which essentially means

1 Guillen states that organizational ideologies “can serveas cognitive tools that managers use to sort out the complex-ities of reality, frame the relevant issues, and choose amongalternative paths of action” (1994: 4). Abrahamson definesrhetoric as “spoken or written discourse that justifies the useof a set of techniques for managing organizations or theiremployees” (1996: 259).

2 By bracketing these elements together, we end up with abroad phenomenon. But the distinctions among practice,process, structure, and techniques are not clean, either con-ceptually or empirically, so it would be difficult to definemanagement innovation in a way that excluded one or otherof them. Moreover, our analysis suggests that there are im-portant similarities across the different forms of manage-ment innovation, especially with regard to how they aregenerated. We therefore find it useful to bracket togethermanagement innovations across these areas, “as if theyconstitute a homogeneous entity” (Alange, Jacobsson, &Jarnehammar, 1998: 7).


without known precedent. But many other re-searchers implicitly see innovation as “new tothe organization” so that, for example, the ini-tial introduction of a TQM program to an or-ganization might be categorized as a manage-ment innovation (e.g., McCabe, 2002; Zbaracki,1998). Our interest in this article is in new tothe state of the art innovations, for the primaryreason that this is the area where existingknowledge is the most limited. But the bound-ary between the two definitions is blurred: ifone considers a spectrum of approaches to theimplementation of management practices, onthe left side an organization might buy an “offthe shelf” practice from a consultancy, andon the right side it might come up with acompletely novel innovation of its own. Ourinterest is on those innovations toward theright side of the spectrum, where the level ofadaptation to the specific context of the inno-vating organization is high and where there isa considerable level of uncertainty regardingits outcome.

Third, what is the purpose of managementinnovation? Proponents of both the fashion andcultural perspectives see management innova-tion as having little lasting impact on the orga-nization, whereas those of the institutional andrational perspectives view management inno-vation as generating positive outcomes for theinnovating firm and/or for society as a whole. Assuggested earlier, our focus is aligned most di-rectly with the rational perspective in that weview management innovation as intending tofurther the organization’s goals, which may in-clude both traditional aspects of performance(e.g., financial goals) and softer aspects (e.g.,employee satisfaction). This is appropriate be-cause it helps to explain why firms are preparedto engage in the costly and somewhat risky pro-cess of management innovation in the firstplace. This approach serves to underline theimportant point that not all management inno-vations are ultimately successful. For example,Volvo experimented for many years with cellu-lar manufacturing, with the intention of deliver-ing significant benefits, but the innovation wasultimately discontinued (Berggren, 1992). More-over, it should also be noted that goals arerarely entirely exogenous to the organization;indeed, the process of innovating can result inthe introduction of new practices or programs

that ultimately change the organization’s goals(Selznick, 1957).

In sum, we define management innovation3 asthe generation and implementation of a man-agement practice, process, structure, or tech-nique that is new to the state of the art and isintended to further organizational goals (see Ta-ble 2 for a list of examples). And while it is not anecessary component of our definition, it isworth reinforcing that our perspective on man-agement innovation gives conscious attention tothe individuals who drive the process. Indeed,one of the themes of this article is the need toincrease the emphasis on human agency inmanagement innovation while not losing sightof the contextual dynamics that are the focus ofthe institutional and fashion perspectives. AsMcCabe puts it, “What is required is an under-standing of innovation as part of a far morecomplex social process: interrelated to the wayin which individuals interpret, act, and ascribemeaning to the world” (2002: 509).

Management Innovation versus RelatedConstructs

Having established an operational definitionof management innovation, we still need tomake a prima facie case that a theoretical dis-cussion of the process of management innova-tion—in its own right—is necessary.

We propose three key factors that make man-agement innovation distinctive. First, there areimportant differences in the nature of the outputsof management innovation and technological in-novation that affect how the respective processesunfold. Management innovations are typicallytacit in nature and “difficult if not impossible toprotect by patent” (Teece, 1980: 464); they are alsorelatively “difficult to observe, define and to iden-

3 It should be noted that there are several related terms inuse: managerial innovation (Kimberly & Evanisko, 1981), ad-ministrative innovation (Damanpour & Evan, 1984), organi-zational innovation (Alange et al., 1998; Damanpour & Evan,1984; Kimberly & Evanisko, 1981), and management innova-tion (Abrahamson, 1991; Kossek, 1987; Stata, 1989). Organiza-tional innovation is sometimes used to imply any type ofinnovation generated by organizations, including new prod-ucts. Administrative innovation typically refers to a narrowrange of innovations around organizational structure andhuman resource policies and does not include innovationsin, for instance, marketing or operations management. Wetherefore prefer the term management innovation.


tify system borders for” (Alange et al., 1998: 8).Taken together, these attributes allow a higherlevel of subjective interpretation on the part of thepotential user than is common with technologicalinnovations, which, in turn, increases the impor-tance of the social and political processes fol-lowed by the proponents of the innovation.

Second, very few organizations have well-established and specialized expertise in thearea of management innovation. A typical largeorganization might employ tens or hundreds ofscientists with technological innovation skillsbut few, if any, with proven management inno-vation skills (the closest are organization devel-opment consultants, who seek systemic ways ofimproving the overall effectiveness and healthof the organization). This lack of expertise bothheightens the uncertainty of management inno-vation for people across the organization andincreases the need for external support.

Third, the introduction of something new tothe state of the art creates ambiguity and uncer-tainty for the individuals in an organization.Ambiguity arises because of a lack of under-standing of the intended value of the innovation,

and uncertainty arises because of a fear that theinnovation will have negative consequences forthe individual and/or the organization. If an or-ganizational change is proposed that has al-ready been successfully implemented else-where (e.g., the installation of a new IT system),its proponents can allay the concerns of individ-uals by referring back to those prior successes,but if the change is new to the state of the art, thenthe task of reducing ambiguity and uncertainty ismuch harder. Of course, all types of innovationgenerate uncertainty and ambiguity, but their im-pact in the case of management innovation islikely to be more far-reaching because of the restof the attributes identified above.

Taken together, these attributes suggest thatthe management innovation process can poten-tially require fundamental changes in the rou-tines or DNA of the organization4 (Argyris &Schon, 1978) that make it very difficult to under-take in an effective manner, and significantly

4 We are indebted to an anonymous reviewer for suggest-ing this point.

TABLE 2Examples of Management Innovation

Example How It Fits the Definition of Management Innovation

Modern research lab (e.g., Hargadon, 2003) A new structure to manage the technological innovation process;intended to improve technological and product innovations

Divisional (M-)form (e.g., Chandler, 1962) A new organizational structure for dealing with complex,multiple-product, and multiple-market firms

Toyota production system (e.g., Ohno, 1988) A new set of practices and processes aimed at improvingproduction efficiency and reducing waste

Total quality management (e.g., Zbaracki, 1998) A new set of practices and processes aimed at reducing qualitydefects and improving customer satisfaction

Discounted cash flow (e.g., Pezet, 1997) A new technique intended to improve investment and budgetingdecisions by adding a temporal dimension

Spaghetti organization (e.g., Foss, 2003) A new organizational structure with the objective of increasingemployee initiatives and overcoming problems of hierarchy

Cellular manufacturing (e.g., Berggren, 1992) A new process for managing tasks inside a production unitaimed at improving employee satisfaction and productionoutput

NASA new organization (e.g., Carroll, Gormley, Bilardo,Burton, & Woodman, 2006)

A new structure and practice for teams to perform complexmodeling and analysis without colocation

Activity-based costing (e.g., Kaplan, 1998) A new practice and technique for assigning costs aimed atproviding more realistic cost assessments

Modern assembly line (e.g., Hounshell, 1984) A new set of practices and processes with the goal of improvingproduction efficiency and lowering costs

Balanced scorecard (e.g., Kaplan, 1998) A new technique and practice for integrating various types ofinformation with the aim of making more informed decisions

Quality of work life (e.g., Yorks & Whitsett, 1985) A new set of practices and processes around the job design ofemployees with the goal of improving their happiness at work


harder than the generic process of organizationalchange (where the change is just new to theorganization rather than the state of the art) orthe process of technological innovation (wherethe innovation is relatively more tangible andless system dependent). These factors, in turn,highlight the need for management innovatorsto seek out distinctive approaches to buildingthe legitimacy of the new practice to make itacceptable to the various constituencies in theorganization (Ashforth & Gibbs, 1990; Green-wood, Hinings, & Suddaby, 2002; Suchman, 1995).

One such approach is likely to be a greaterdegree of emphasis on independent validationfrom external sources to establish the legitimacyof the new practice than would be the case for ageneric organizational change activity (whereprevious successful changes can be referred to)or a technological innovation (which is morelikely to have objective benefits and/or a tech-nical standard to which it subscribes). Such ex-ternal sources can be useful providers of bothmoral and cognitive legitimacy in the absenceof hard evidence that management innovationwill be valuable and can allow the innovators to“manipulate the environmental structure by cre-ating new audiences and new legitimating be-liefs” (Suchman, 1995: 587).

A second approach is likely to be for the inno-vators to focus their efforts on organizations (orspecific units within organizations) with priorexperience in management innovation, on thebasis that these organizations/units understandthe challenge faced by the management inno-vators and are therefore likely to be more toler-ant of the uncertainty and ambiguity it brings(Kossek, 1989). In legitimacy-seeking terms, thiscan be seen as a strategy to “select among mul-tiple environments in pursuit of an audiencethat will support current practices” (Suchman,1995: 587).

It is also useful to briefly consider the differ-ence between a management innovation and amanagement fashion—a “relatively transitorycollective belief that a management technique[or idea] leads to rational managementprogress” (Abrahamson, 1996: 257). For the mostpart, management innovations can be thoughtof as potential management fashions: some,such as Six Sigma and the balanced scorecard,become management fashions when they gettaken up by a significant number of manage-ment fashion users; others either die out or re-

main in use in a relatively small number offirms. But it is also possible for managementfashions that are expressed in highly abstractterms to spur management innovations. For ex-ample, the knowledge management fashion ofthe early 1990s led individuals and organiza-tions to put in place specific practices, such ascommunities of practice, that were managementinnovations in their own right. We return to therelationship between management innovationand management fashion in the discussion.

THE PROCESSES OF MANAGEMENTINNOVATION

The second part of this article addresses thequestion “What are the processes through whichmanagement innovations come about?” Build-ing on our conception of what makes manage-ment innovation unique, we develop a frame-work that highlights the four interlinked phasesof the process and the roles played by two keysets of stakeholders. This framework is thenfleshed out using theoretical arguments and ex-amples from the management literature.

The framework, illustrated in Figure 1, hastwo dimensions. The horizontal dimension con-sists of four phases of the innovation process: (1)motivation is concerned with the facilitatingfactors and precipitating circumstances thatlead individuals to consider developing theirown management innovation; (2) invention is aninitial act of experimentation out of which a newhypothetical management practice emerges; (3)implementation is the technical process of es-tablishing the value of the new managementinnovation in vivo (i.e., in a real setting); and (4)theorization and labeling is a social processwhereby individuals inside and outside the or-ganization make sense of and validate the man-agement innovation to build its legitimacy.

This four-phase process builds on the in-trafirm evolutionary perspective advanced byBurgelman (1991) and Zbaracki (1998), wherebychanges perceived in the environment (motiva-tion) lead to variations in management prac-tices (invention), some of which are then subjectto internal selection (implementation) and reten-tion (theorization and labeling). We expect theprocess to be shaped in large part by the con-scious and deliberate actions of key individuals,but we also recognize there is a role for unin-tended actions by individuals and random


changes inside the organization in affecting theprocess of management innovation.

As per the vertical dimension in Figure 1, weexpect two groups of individuals to shape theprocess: (1) internal change agents, who are theemployees of the innovating company proactivein creating interest in, experimenting with, andvalidating the management innovation in ques-tion (DiMaggio, 1988; Howell & Higgins, 1990),and (2) external change agents, who, similar toGuillen’s (1994) management intellectuals andAbrahamson and Fairchild’s (2001) idea entre-preneurs, are independent consultants, academ-ics, and gurus proactive in creating interest in,influencing the development of, and legitimiz-ing the effectiveness and retention of new man-agement practices (DiMaggio, 1991). As sug-gested earlier, we expect external changeagents to play a major role in management in-novation because they provide legitimacy andexpertise in many different phases of the pro-cess. They can give credibility to the originalidea that sparks off the experiment inside thecompany, they can act as sounding boards or

action researchers alongside the internal teamduring the implementation phase, and they canplay a role in theorizing about and labeling theinnovation (Chandler, 1962; Kaplan, 1998; Pezet,1997; Stjernberg & Philips, 1993; Yorks & Whit-sett, 1985).

A key feature of this framework is that itdoes not assume a simple left-to-right se-quence of activities. As Zbaracki observes, theprocesses of innovation typically will be com-plex, recursive, and occurring “in nested andrepeated cycles of variation, selection and re-tention” (1998: 612). We address this point byfocusing our attention on how individuals it-erate between the adjacent cells in the frame-work, identifying ten core activities.5 For ex-ample, the activity “problem-driven search”involves internal change agents’ iterating

5 It is quite possible to propose activities that span non-adjacent boxes—for example, between boxes 1 and 6. Ouranalysis, however, suggests that such activities are proba-bly rare, so in the interests of keeping the framework rela-tively simple, we focus on the ten core activities.

FIGURE 1Management Innovation Process Framework


back and forth between motivation and inven-tion, whereas the activity “agenda setting”involves interaction between internal andexternal change agents (cf. Burgelman, 1983,1991).

Figure 1 identifies the ten core activities (indi-cated by the double arrows and text spanning theboxes) and the nature of the innovation or its con-stituent parts (indicated by the numbered textwithin each box). Figure 1 also indicates the im-portant role of context in shaping managementinnovation. Organizational context is the admin-istrative and social mechanisms that man-agement can manipulate to shape the behav-iors of actors in the organization (Bower, 1970;Burgelman, 1983) and will have a direct impact(positive or negative) on the ability of internalchange agents to pursue the core activities asso-ciated with management innovation. Environmen-tal context is the broad set of stimuli—exogenousto the focal organization—that shapes the man-agement discourse (Guillen, 1994) and thereby in-fluences the priorities and efforts of externalchange agents as they engage with organizations.While these two aspects of context potentially in-fluence all activities associated with manage-ment innovation, we discuss them in detail only inthose places where their role is critical.

Motivation Phase

The motivation phase refers to the precondi-tions and facilitating factors that lead individu-als in a company to be motivated to experimentwith a new management innovation. It ad-dresses the question “Under what conditions, orin what circumstances, do executives deem ex-isting management practices to be inadequatefor their needs?” The answer to this question isfar from straightforward because it is necessarynot only to identify the conditions under whichexecutives search for new management innova-tions but also to specify the circumstances inwhich they choose not to adopt one of the exist-ing solutions that can be obtained in prefabri-cated form from the so-called management fash-ion-setting community (Abrahamson, 1996). Formanagement innovation to occur, in otherwords, the market for management fashions hasto fail.

Internal change agents. Consider first thoseon the “demand” side of the market. Establishedtheory suggests that the demand for new man-

agement practices is driven by the identificationof a novel problem—a perceived shortfall be-tween the organization’s current and potentialperformance6 (Barley & Kunda, 1992; Cyert &March, 1963; Guillen, 1994). A perceived shortfallcan be caused by a problem that underminescurrent performance but also by opportunitiesthat may exist and the anticipation of environ-mental changes (Cyert & March, 1963; Ocasio,1997). In some instances individual managers inan organization may attribute this shortfall sim-ply to a failure to execute under existing ar-rangements, but in others they may identify aspecific problem or opportunity vis-a-vis theirexisting management practices. They engage ina problem-driven search process that beginswith existing and proximate contacts, and oncethey find a satisfactory solution, they terminatethe search and implement the solution.

In cases where the individuals choose to lookoutside their own organization for a solution,they are confronted with a management fash-ion-setting community, which shapes the beliefsystems of users as to what is rational and ped-dles its particular solutions to users’ problemsor perceived opportunities. Constrained both bythe pressure to conform to the norms of ration-ality of the organization’s institutional field andby the costs of evaluating multiple competingoffers, managers will often choose to adopt thesolution that appears to be the most progressiveand legitimate (Abrahamson, 1996). This, ofcourse, is the process through which manage-ment fashions spread.

Sometimes, however, managers will choose toexperiment with developing their own solutionsto the problem or performance shortfall they areaddressing. In the language of institutional the-ory, such an act can potentially “appear irratio-nal and retrogressive” (Abrahamson, 1996: 263),but there are several conditions under which itmay transpire—when the pressure to try some-thing new overcomes the pressure to conform toexternally arbitrated management norms. Wesuggest two such conditions. The first is where

6 We acknowledge that the notion of a perceived shortfallimplies some cognitive process through which environmen-tal changes are converted into action. In other words, someindividuals will be able to interpret changes, whereas oth-ers may not. These cognitive processes, however, are not ourcentral concern here, and, hence, we simply assume theytake place.


internal change agents are able, through anagenda-setting activity, to frame the problem oropportunity such that internal stakeholdersview it as genuinely new or as something thatcannot be resolved by buying an existing solu-tion from the fashion-setting community. Con-sider, for example, the Danish hearing-aid man-ufacturer Oticon. Its CEO at the time, LarsKolind, was able to convince his employees andboard of directors that Oticon faced a significantthreat to its viability from large competitors,such as Philips and Siemens, and this was suf-ficient for him to push through a radical innova-tion that he labeled the spaghetti organization(Foss, 2003; Lovas & Ghoshal, 2000).

The second broad condition is when the or-ganizational context is supportive of new think-ing and thereby enhances the degree of freedomfor internal change agents to pursue novelideas. The notion of a supportive organizationalcontext has been conceived in two broad waysin the literature, both of which are potentiallyrelevant here. One set of arguments focuses onthe role of management in creating an informalcontext that encourages individuals to take ini-tiative (Ghoshal & Bartlett, 1994). For example,the more exposure managers have to differentindustries and organizations, the more receptivethey are likely to be to ideas for new practices(e.g., Oldham & Cummings, 1996). The other setof arguments is more concerned with the formalprocesses of the organization and the extent towhich they institutionalize the pursuit of new orbetter ways of working. For example, we mightexpect the rigor of the decision-making processin the organization to have a positive influenceon internal change agent motivation because,by clarifying the pros and cons, the uncertaintyand ambiguity associated with an idea are re-duced.

In sum, internal change agents evaluate aproblem or opportunity through an agenda-setting dialogue with external change agentsthat helps to establish its novelty, and with ref-erence back to the supportiveness of the currentorganizational context. To the extent that theproblem or opportunity can be framed as noveland the context is supportive, the preconditionsfor management innovation exist.

External change agents. The role of externalchange agents in motivating management inno-vation begins with their ability to identify newthreats and opportunities in the business envi-

ronment that require management attention.But, as above, this is only part of the story be-cause many external change agents see theirrole as stimulating managers (through the agen-da-setting process) to adopt an existing or fash-ionable practice, rather than to create a newone. We suggest that the nature of the manage-ment knowledge that external change agentsshare with their internal counterparts is an im-portant factor in motivating management inno-vation. One can identify a spectrum of manage-ment knowledge, with new ideologies and ideasat the more abstract end and new practices andtechniques at the more practical end. Those ex-ternal agents who focus on the practical end ofthe spectrum, with standardized or “off theshelf” solutions to the problems facing manag-ers, will encourage the adoption of managementfashions. In contrast, those external changeagents who focus on the more abstract end ofthe spectrum will more likely provide a fertileenvironment for management innovation be-cause of the “interpretive viability” of theirideas—that is, the extent to which these ideascan be adapted to multiple agendas (Benders &van Veen, 2001; Clark, 2004).

External change agents can interact both di-rectly and indirectly with internal changeagents in agenda setting.7 They generate theirinfluential points of view by linking their inter-pretation of changes in the environmental con-text with agenda-setting conversations aboutthe practical issues executives face. They arealso influenced by prior cases of managementinnovation they have been involved with; in Fig-ure 1 this feedback loop is indicated by the threehorizontal processes (idea contextualizing, idearefining, and reflective theorizing) that we dis-cuss in greater detail below.

Invention Phase

Invention refers to either random or plannedvariations in management practices, some of

7 An example of direct interaction is the U.K.-based “Be-yond Budgeting Round Table” (Hope & Fraser, 2003), whosefounders worked actively with many organizations to helpthem make sense of the limitations of their traditional bud-geting systems. An example of indirect influence is TomPeter’s 1987 book, Thriving on Chaos, which was the inspi-ration for an innovative organization structure at Welling-ton, a Canadian insurance company (Birkinshaw & Mol,2006).


which subsequently are selected and retainedby the organization (Burgelman, 1991; Campbell,1965). It is the phase in which a hypothetical newpractice is first tried out in an experimental way.

Internal change agents. Figure 1 suggeststhree ways in which internal change agentsmight come up with a hypothetical new practice:problem-driven search, trial and error, and idealinking with external change agents. Whileeach of these subprocesses has value in its ownright, our expectation is that invention is morelikely when they are applied in combination,just as new technologies typically arise throughnovel combinations of existing ideas and prac-tices (Hargadon, 2003: 65; Kogut & Zander, 1992;Schumpeter, 1947).

Problem-driven search is a conscious and of-ten planned activity in which individuals seekto create a new practice in response to a specificproblem or opportunity (Cyert & March, 1963).Chandler’s (1962) description of Alfred Sloan’sintroduction of the M-form structure suggests aprocess of this type: Sloan’s proposed changesin 1920 were a direct response to the complexitythat had been created by bringing together fiveindependent businesses. As Sloan himselfnoted, “I wrote the ‘Organizational Study’ forGeneral Motors as a possible solution for thespecific problems created by the expansion ofthe corporation after World War I” (Sloan, 1963:32).

Idea linking is when individuals in the orga-nization make connections between the newideas proposed by external change agents andthe experimental efforts underway inside theorganization. Such connections can be viewedas a form of brokering between relatively dis-parate networks (Granovetter, 1973; Hargadon,2003), and they can be nurtured by encouragingindividuals to read widely and to attend confer-ences and other networking events. For exam-ple, the concept of activity-based costing wasdeveloped by Robert Kaplan, a business schoolprofessor, through conversations at a conferencewith executives at Scovill Corporation and JohnDeere Component Works about new cost mea-surement approaches they were experimentingwith (Kaplan, 1998: 98). Kaplan had been devel-oping his own ideas about ways of overcomingthe failure of existing cost measurement sys-tems (idea contextualizing), and the Scovill andDeere executives had been experimenting in-side their own organizations (trial and error). But

the birth of activity-based costing per se camewhen Kaplan and the corporate executives be-gan to interact.

Finally, trial and error occurs when the feed-back about a new idea comes from trying it outin practice, rather than from how well it solvesan existing problem or how well it fits with theideas of an external change agent. We can ex-pect trial and error to be an important part ofany effective management innovation (when un-dertaken in combination with other activities),but it is also possible for trial and error to be anunintended or ad hoc starting point for thewhole process. For example, furniture retailerIKEA allowed its customers to pick up their ownflat-pack products from the warehouse becauseof staffing shortages at a busy time, and thispractice proved so effective (though in ways thatwere not foreseen when it was first tried out)that it was rapidly implemented in other stores(Bartlett & Nanda, 1990). New practices canemerge through serendipitous events of thistype, and they can also occur when an existingpractice is adapted to fit different circumstances(Czarniawska & Sevon, 2005; Mamman, 2002;Sturdy, 2004).

External change agents. The role of externalchange agents in the invention phase mirrorsthat of internal change agents. In other words,their ability to come up with a new idea formanagement practices is a function of three of-ten-linked activities: idea contextualizing, idearefining, and idea linking. Idea contextualizinginvolves speculating on new ways of workingthat potentially address threats or opportunitiesin the business environment. This is a commonactivity among management thinkers, involvinga back-and-forth interaction between the myr-iad of issues faced by managers on the one sideand the set of possible solutions on the other.For example, Davenport and Prusak (2003: 179)describe how their initial ideas about knowl-edge management emerged through the re-search agenda of the Ernst & Young Centre forBusiness Innovation.

Idea refining can be viewed as a form of dis-ciplined imagination (Weick, 1989), in which theexternal change agent works through the impli-cations of a particular idea in terms of how itmight work in practice or in other contextualsettings. Campbell (1974) viewed this activity as“ideational trial and error”; it is directly analo-gous to the process of trial and error that inter-


nal change agents go through, but it occurs inthe conceptual domain.

Idea linking, as discussed earlier, involvesreconciling the external change agent’s knowl-edge base (which is typically deep in terms ofacademic discipline or functional expertise)with the context-specific ideas of internalchange agents. For example, activity-basedcosting emerged through a combination of dis-satisfaction with existing accounting methodsand Kaplan’s perspectives on the changingpressures on manufacturing companies, but itthen required an explicit link to Scovill andDeere for the concept to be put into practice(Kaplan, 1998).

Taken together, these three activities can beviewed as alternative but complementary ap-proaches to theory development: idea contextu-alizing is about developing new solutions to ex-isting problems, idea refining is about workingthrough the consequences of an idea through aseries of “thought trials” (Weick, 1989), and idealinking is an inductive-deductive loop throughwhich concepts are reconciled with empiricalevidence.

Implementation Phase

The implementation phase consists of all theactivity on the “technical” side of the innovationafter the initial experiment up to the point wherethe new management innovation is first fullyoperational. Like Zbaracki (1998), we distinguishbetween the technical elements of the work andthe rhetorical elements that are concerned withtheorizing and labeling the innovation (dis-cussed in the next section). Our description ofthis phase involves making sense of the actionsof internal and external change agents in imple-menting an in vivo new practice, as well asunderstanding the ways existing employees re-act to it and influence its implementation(Lewin, 1951).

Internal change agents. Figure 1 indicates twoprimary activities that internal change agentsengage in as they attempt to implement an invivo new practice. One is trial and error, inwhich progress is achieved by monitoring andmaking adjustments against the original con-cept. For example, to develop Procter & Gam-ble’s “Connect and Develop” innovation pro-cess, its originator, Larry Huston, observed thathe ran six years of experiments before he had a

proven methodology for tapping into externalsources of technology (Birkinshaw, Crainer, &Mol, 2007). The other activity is reflective exper-imenting, in which internal change agents eval-uate progress against their broader body of ex-perience. For example, Stjernberg and Philipsmade the following observation about how suchindividuals can be most effective:

As the [innovation] attempt proceeds, he [the in-ternal change agent] needs to be able to learnfrom the consequences of his own actions and toalter these actions accordingly. He will be morecapable of seeing and learning how to managethe change and the learning dilemmas if he has awell-developed capacity for reflection (1993: 1199).

Organizational context also plays an impor-tant role in facilitating or inhibiting the imple-mentation of new ideas. Zbaracki (1998) ob-served that the reaction of employees toimplementing new management practices isgenerally negative: they are likely to be intimi-dated by innovations, particularly if the innova-tions have a significant technical componentand the employees are mostly ignorant of theirpotential benefits. But the cultural perspectiveon management innovation suggests employ-ees’ reactions will also vary according to theirpersonal circumstances and the immediatework environment in which they are placed(Knights & McCabe, 2000). The implementationprocess is therefore likely to involve careful ma-neuvering by internal change agents as theyfocus their efforts on those parts of the organi-zation that are more amenable to change. As theliterature on technological innovation de-scribes, such tactics include pursuing corridorsof indifference through the organization, build-ing coalitions of senior executives to supporttheir ideas, framing innovation as an opportu-nity and not a threat, accessing resources be-yond the individual’s control, and maintaining agenerally tenacious and persistent attitude(Howell & Shea, 2001; Rothwell et al., 1974; Schon1963; Wrapp, 1967).

Taken as a whole, the literature suggests thatimplementation transpires through a dialecticalprocess (Van de Ven & Poole, 1995). Internalchange agents try out the proposed new prac-tice, and they evaluate its progress against theoriginal idea (trial and error), its conceptual va-lidity (reflective experimenting), and the reac-tions of other employees (i.e., the organizationalcontext). Some aspects of the new practice may


prove to be unworkable, and the reactions ofemployees may in some cases be directly op-posed to what is being pursued. But after sev-eral iterations, an outcome will often emergethat is a synthesis of the opposing forces(Knights & McCabe, 2000; Zbaracki, 1998). Inother cases the internal resistance generated byvarious aspects of the organizational contextmay be sufficiently strong that the experimentalnew practice does not get taken forward at all.

External change agents. The role played byexternal change agents in the implementationphase is less clear-cut than in other phases.External change agents lack deep contextualknowledge of the focal organization, as well asthe accountability for results that most internalchange agents face, so they rarely play an ac-tive role in actually implementing new ideas invivo. However, we suggest they potentially playa critical indirect role in making managementinnovation happen.

The essence of the external change agent’srole is to create a thought experiment (analo-gous to an in vitro experiment performed by abiologist before a new molecule is tried out invivo in a live body). External change agentsdraw from their prior experience (reflective the-orizing) and their deep knowledge of a particu-lar conceptual domain (e.g., an academic disci-pline or a functional competency) to sharpentheir new idea (idea refining), and on the basisof the insights gained, they attempt to influenceand direct the implementation efforts of the in-ternal change agents (idea testing). There issome evidence of what this set of activities lookslike in practice. For example, Stjernberg andPhilips (1993) highlight the roles externalchange agents play as facilitators and soundingboards, and Kaplan provides a thoughtful ac-count of his own experiences in this area:

During this process of intimate engagement withimplementation, the action researcher [i.e., theexternal change agent] not only advances thetheory underlying the concept, but also becomesa skilled practitioner. . . . Such skill also enablesthe action researcher to distinguish between the-ory limitations vs. poor implementations whencompanies experience difficulties applying theinnovation (1998: 106).

These activities can, as Kaplan suggests, bethought of as a form of action research—wherethe aim is to “build theories within the practicecontext itself, and test them there through inter-

vention experiments” (Argyris & Schon, 1991: 86).In terms of our framing, the external changeagent therefore plays a dual role, oscillatingback and forth between his or her thought ex-periment about what might make sense in theworld of management ideas and the in vivo im-plementation of what actually works in theworld of practice. This dual role potentially of-fers great insights to both worlds. Unfortunately,though, the evidence suggests interventions ofthis type are on the decline. While action re-search has an illustrious past (Emery & Trist,1960; Lewin, 1946), it has lost ground in recentdecades to more passive forms of research, apoint we return to in the discussion.

Theorization and Labeling Phase

The fourth phase results in a theorized newpractice—one that is retained and institutional-ized within the organization. While an effectiveimplementation, as described above, is clearly anecessary part of the process, the intangible andsystem-dependent nature of management inno-vation means that the results of the implemen-tation are likely to be highly unclear for severalyears (Teece, 1980). We therefore expect thatthere will be an important rhetorical componentassociated with a successful management inno-vation. Key change agents will seek to make thecase with constituencies inside and outside theorganization that the new practice is legitimate,even though this new practice represents (bydefinition) a departure from the tried-and-testedofferings of the fashion-setting community(Abrahamson, 1996; Suchman, 1995).

We view this phase as consisting of two inter-linked elements: theorization and labeling. The-orization is increasing “the zone of acceptanceby creating perceptions of similarity amongadopters and by providing rationales for thepractices to be adopted” (Greenwood et al., 2002;Strang & Meyer, 1993; Suddaby & Greenwood,2005; Tolbert & Zucker, 1996). In the context ofthis article, theorization is therefore first aboutbuilding a logical rationale for the link betweenan organization’s opportunities and the innova-tive solution that is being put in place, and sec-ond about expressing that logic in terms thatresonate with key constituencies inside or out-side the organization. Labeling refers to the se-lection of a name for the management innova-tion in question that reflects its theorization.


Labels have been shown to have a significanteffect on the acceptability of management prac-tices to various constituencies (Eccles & Nohria,1992; Kieser, 1997).

Internal change agents. The primary role ofinternal change agents in this phase is to buildlegitimacy for the innovation among employeesof the organization.8 As a means of defusing thewidespread skepticism toward management in-novation that employees often exhibit (Knights& McCabe, 2000), internal change agents willoften theorize about the value of the new prac-tice and label it in such a way that employeessee its potential value, and also see it as con-sistent with the prevailing norms of the organi-zation. The outcome, in other words, is a newpractice that has been theorized vis-a-vis theimmediate organizational context (whereas ex-ternal change agents focus on theorizing be-yond this immediate context).

It is useful to apply Suchman’s (1995) threebasic forms of legitimacy to help clarify the ap-proaches used here. Pragmatic legitimacy (ap-pealing to employees’ self-interested calcula-tions) is pursued by showing early evidence ofthe innovation’s value and by allaying employ-ees’ concerns, but such evidence is likely to behard to come by in the early stages of implemen-tation. Moral legitimacy (a positive normativeevaluation through consistency with the organi-zation’s value system) is pursued by playing uphow the innovation builds on previous changesthe company has been through and/or that theorganization has a tradition of trying out newideas. Finally, cognitive legitimacy (the devel-opment of plausible explanations for the inno-vation that mesh with larger belief systems andthe experienced reality of the audience’s dailylife) is pursued by showing that managementinnovation is a necessary solution to a specificand novel challenge the organization is facing(Tolbert & Zucker, 1986).

This form of internally focused theorizationand labeling is best performed by internalchange agents because of their existing credi-bility with employees (Stjernberg & Philips,1993). It is achieved through a combination of

reflective experimenting (whereby the newpractice is interpreted in light of the internalchange agents’ broader body of experience) andtheory linking with external change agents (bytalking to them directly, by reading their books,or by listening to them speak).

External change agents. The role of externalchange agents in the theorization and labelingphase is twofold. First, they have an importantrole to play in building cognitive legitimacy in-side the organization, because their status asindependent experts means they are broughtin—for example, as speakers at companyevents—to verify both the significance of thechallenge the organization is facing and the va-lidity of the proposed innovation as a responseto that challenge. This form of input is referredto in Figure 1 as theory linking.

External change agents also play a major rolein building legitimacy for the innovation beyondthe boundaries of the organization. This is oftendeemed by the organization to be a worthwhileactivity, because most employees have somelevel of awareness of how their organization isviewed by external constituencies (through cus-tomers and outside partners, friends, or the me-dia), so their opinion of the innovation is shapedto some degree by what external constituenciessay about it. Influential media such as newspa-pers and magazines have been shown in othercontexts to play an important role in legitimat-ing the actions of individual executives and or-ganizations (Deephouse, 2000; Mazza & Alvarez,2000; McQuail, 1985; Pollock & Rindova, 2003),and we would expect them to play an importantrole here as an indirect communication channelthrough which employees’ attitudes toward theinnovation are shaped.

The externally focused theorization and la-beling process involves a set of challengesdifferent from that of the internally focusedprocess. The external constituency is typicallymanagement intellectuals, such as seniorleaders in other organizations, journalists,consultants, and academics (Guillen, 1994).These individuals operate at a more abstractlevel than employees (i.e., they are likely tofocus on management ideas rather than prac-tices), they are more positively disposed to-ward management innovation than employees(because they run no personal risk of failure),and they have a less detailed understandingof the innovation than employees. As a result

8 There is also potentially a role for internal changeagents in building legitimacy for external stakeholders, al-though external change agents typically do this rather moreeffectively. We discuss this possibility in the following sec-tion.


of these differences, the approaches used tobuild legitimacy for the innovation to externalaudiences are likely to be somewhat different.Pragmatic legitimacy can only be achievedvis-a-vis external constituencies by demon-strating that the innovation is yielding valu-able outputs. Procter & Gamble claimed, forexample, that the company increased the per-centage of new products arising from externalideas to 40 percent as a result of its Connectand Develop innovation process (Huston &Sakkab, 2006). However, such evidence is rel-atively hard to put together in the early stagesof a management innovation, for the reasonswe have discussed.

Moral legitimacy is pursued by seeking apositive normative evaluation of the innova-tion among managerial intellectuals, whichmay involve showing how the innovation isprocedurally consistent with existing manage-ment practice (e.g., Six Sigma was positionedas a successor to total quality management;Harry & Schroeder, 2000), or it may involvedemonstrating the credentials of the organiza-tion as a proven high performer with a trackrecord of innovation. Cognitive legitimacy, incontrast, is typically pursued by framing theinnovation as a logical solution to one of thegeneric challenges or problems that all largeorganizations face. In Kieser’s words, “The im-plementation of the new principles is pre-sented as unavoidable [by management gu-rus], because the old principles are bound tofail in the face of the menacing dangers” (1997:57). This approach is similar to the pursuit ofcognitive legitimacy with employees, excepthere the arguments will be expressed in moreabstract or generic terms.

External change agents typically developtheir knowledge of a particular innovationthrough prolonged interactions with internalchange agents (through idea-linking, idea-testing, and theory-linking activities) andthrough their own reflective theorizing. Externalchange agents have the skills for contextualiz-ing the innovation in terms of contemporarybusiness challenges, as well as the necessarycontacts with media organizations. It should beobserved that internal change agents can alsohelp to build legitimacy for management inno-vation with external constituencies by writingarticles or books and speaking at conferences.Although they may lack the theorization skills

and personal networks of external changeagents, they have greater credibility throughtheir personal championing of the process,which may help to establish the moral legiti-macy of the innovation.

DISCUSSION AND AVENUES FORFUTURE RESEARCH

Here we have argued that management in-novation is an important phenomenon in thefield of management and that the generativemechanisms through which it occurs (i.e.,management innovation processes) are theo-retically interesting in their own right, andalso relatively poorly understood. We have de-veloped a framework highlighting the impor-tant roles of internal and external changeagents in the process and the ways these twosets of actors interact with one another. Ourframework suggests a number of importantinsights, and it opens up some interesting an-gles for further research.

Sequencing of Management InnovationActivities

We first observed that the process of manage-ment innovation does not always proceed as alinear sequence of activities from motivationthrough to theorization and labeling. For exam-ple, an organization that suffers from too much“smart talk” (Pfeffer & Sutton, 2000) may haveseveral initiatives that are well progressed interms of motivation and theorization and label-ing, but with no commensurate investment ininvention and implementation. In such a casethe appropriate managerial intervention mightbe to focus attention on implementation as ameans of establishing which initiatives areworth pursuing, whereas other organizationalsettings might require different interventions.

However, at the moment we know little aboutthe relative effectiveness of different sequencesof activities, which makes it difficult to offer anycoherent advice to managers about how to im-prove the quality of their interventions. Ourframework focuses on the “activities,” such astrial and error, that take place between the ad-jacent cells in Table 1 as a means of highlight-ing that innovation is an iterative process. Butan important next step in making sense of the


overall process of management innovationwould be to examine the actual sequencing andphasing of activities over time. While some in-novations may follow a linear sequence of ac-tivities from left to right, others do not; for exam-ple, Procter & Gamble’s Connect and Developprogram was developed as a concept by itschampion, Larry Huston, long before the compa-ny’s CEO articulated the need for it (Birkinshawet al., 2007). Likewise, while we would expectmost management innovations to be initiatedprimarily by internal change agents, it is possi-ble to identify others, such as T-Groups (Benne,1964; Blake, 1995), where many of the core activ-ities were driven by external change agents.Future research should attempt to map out andmake sense of the sequences that actually occurin practice. The historical record is not particu-larly helpful in this regard, because writers willtypically impose their own structure on a pro-cess in order to make sense of it. Research willtherefore need to be done on contemporarycases, and, where possible, these cases shouldbe followed in real time to avoid problems ofretrospective sensemaking bias.

The Role of Internal and External ChangeAgents

Another core element of our framework is thedistinction between internal and externalchange agents. As a matter of definition, inter-nal change agents are employees of the focalorganization whereas external change agentsare not, which, in turn, implies that internalchange agents will typically have superiorknowledge and networks inside the organiza-tion and greater accountability for deliveringresults than their external counterparts. How-ever, it is important for future research to con-sider this distinction more carefully, since itmay not always be clear-cut in practice. Con-sultants, for example, are sometimes secondedto their client companies during a change pro-cess, and ethnographic researchers will oftenbecome employees in the organizations they arestudying for significant periods of time. In bothcases these external actors actually become in-ternal actors on a temporary basis. Moreover,there is evidence that some individuals are ableto switch back and forth between internal andexternal change agent roles during a singleproject (i.e., as action researchers), while others

oscillate between the two roles over the courseof their careers (Davenport & Prusak, 2003).

One avenue for further research, then, is totake a closer look at the key change agentsinvolved in management innovation and the ex-tent to which they are able to take on hybridinternal/external roles. A second line of inquirymight be to consider the extent to which internaland external change agents are acting in har-mony. Here we have assumed that both partieshave a more or less common objective—namely,to implement a successful management innova-tion. However, future research might want torelax this assumption and consider the extent towhich the two parties are truly aligned. For ex-ample, in attempting to build legitimacy for amanagement innovation among internal andexternal constituencies, internal change agentsmay downplay the scale of change required totheir colleagues (perhaps by emphasizing con-sistency with prior norms or a low level of risk)to make the change more palatable, while ex-ternal change agents may exaggerate the scaleof the proposed innovation (perhaps by position-ing it as the antidote to dramatic changes in theindustry) as a way of generating interest amongexternal audiences. These differences in posi-tioning can potentially have deleterious conse-quences for the individuals involved, as well asfor the long-term success of the innovation.

A third avenue for future research that alsobuilds on the internal versus external distinc-tion is to examine the locus of management in-novation. Our framework assumes that it ispossible and meaningful to identify the organi-zation in which a new management practice isfirst implemented. While this approach is validvis-a-vis the existing cases we mentioned, theremay be cases where it is less valid in the future.Increasingly, economic activity transpiresthrough nonfirm networks, such as open-sourcesoftware communities, so we can expect innova-tive ways of organizing to emerge that enablenonfirm coordination of this type. It is also pos-sible, although less likely, that more manage-ment innovations will emerge in vitro in thefuture, perhaps through the efforts of academicsrather than the trial and error of practicing man-agers, in which case the locus of innovation,again, would not be the organization. Futurestudies should therefore give careful attentionto the unit of analysis at which management


innovation is studied, since there are severalpossible models that could be followed.

Management Innovation and ManagementFashion

We have argued that the management inno-vation process is triggered when the market forfashion fails—that is, when an organization pur-sues its own novel practice rather than one sug-gested by the fashion-setting community. How-ever, this argument obscures the importantpoint that, in many ways, the management fash-ion process has important similarities to themanagement innovation process: both involvesignificant roles for internal change agents(Abrahamson [1996] calls them “users” of man-agement fashions) and external change agents(“suppliers” of management fashions), as wellas complex interactions between the two. Andboth can be framed in evolutionary lan-guage—in terms of the introduction of some-thing new to the organization that subsequentlygets selected and retained, or not.

A useful direction for future research, then, willbe to look more closely at how the processes ofmanagement innovation and management fash-ion interact. It may be possible, for example, toidentify ways in which external change agents,such as consultants, influence the emergence ofmanagement innovation, either by suppressingthe level of novelty in the focal organization’s cho-sen solution (e.g., by pushing their own off-the-shelf solutions, regardless of the user’s agenda) orby enhancing it (e.g., by encouraging users to de-velop their own agendas and by putting forwardideas with interpretive viability). Another ap-proach might be to examine the conditions underwhich a management innovation gets picked upby the fashion-setting community and turned intoa management fashion. At an abstract level suchpractices are likely to have highly “progressive”and contemporary labels (Abrahamson, 1996) andare likely to exhibit high levels of external changeagent involvement, but there is room for a muchgreater level of clarity on what these conditionslook like in detail.

Management Innovation and Firm Performance

While our focus in this article was primarily onprocess issues, questions about why individualsengage in management innovation and the extent

to which management innovation helps organiza-tions to fulfill their goals are equally important. Itseems likely, for example, that certain manage-ment innovations will offer more potential forcompetitive advantage than others, depending onthe extent to which they are valuable, rare, andhard to imitate (Barney, 1991), but this argumentremains open to empirical testing.

The consequences of management innovationare complex, because so many different stake-holders are potentially affected. It is necessary toseparate out at least three different sets of conse-quences: (1) the impact of management innovationon various performance metrics inside the inno-vating firm; (2) the impact on the performance andlegitimacy of subsequent adopters of the innova-tion; and (3) the benefits of management innova-tion to society as a whole, in terms of improve-ments of such things as productivity or quality ofwork life. As noted earlier, there has been someresearch on the second of these (e.g., Staw & Ep-stein, 2000), but the first and third remain largelyunexplored. Future research might therefore ex-amine why certain types of management innova-tion take longer to yield dividends than others,whether some management innovations spurwaves of related innovation, and how often andunder what circumstances management innova-tion creates firm-specific competitive advantage.

The Role of Academia in ManagementInnovation

Finally, this article offers some initial thoughtson the role academics can play in the process ofmanagement innovation. Like Abrahamson andFairchild (2001), we are concerned that academicsmay be losing out to other members of the fashion-setting community, such as consultants and gu-rus, in terms of their ability to influence practice.Our framework suggests some possible ways for-ward. One is for academics to become more cre-ative in the development of new ideas andthought experiments that organizations might putinto practice. Another is to become more engagedin the activity we call “idea testing,” whereby theacademic engages closely with the focal organi-zation and brings his or her insight to bear on theparticular problem the organization is grapplingwith. This concept of engaged scholarship (Van deVen & Johnson, 2006) has a long history, but itslegitimacy as a valid form of scholarship has fal-tered in recent decades. Another alternative is a


management innovation laboratory, such as Lon-don Business Schools’ MLab, where researchersand practitioners come together to develop newpractices in partnership.

These suggestions require further exploration,both in terms of the nature of the interventionsthey would require and in the outcomes theywould achieve. They also challenge many of thetraditional orthodoxies of the profession, in thatthey are likely to involve new methodologiesthat are unproven and hard to implement. Butwe believe they are worth pursuing. A moreactive role for management scholars in the pro-cess of management innovation would be ofvalue to innovating organizations, and it wouldallow them to reclaim their previously influen-tial role as creators of both new and useful man-agement knowledge.

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Julian Birkinshaw ([email protected]) is professor of strategic and interna-tional management at the London Business School and research director of theManagement Lab (MLab), a not-for-profit research institute. He received his Ph.D. fromthe University of Western Ontario. His research focuses on innovation and entrepre-neurship in large multinational organizations.

Gary Hamel ([email protected]) is a visiting professor of strategic and interna-tional management at the London Business School and founder of the ManagementLab (MLab), a not-for-profit research institute. He received his Ph.D. from the Univer-sity of Michigan. His research focuses on strategy and innovation in large corpora-tions.

Michael J. Mol ([email protected]) is a senior lecturer in strategic management atthe University of Reading. He received his Ph.D. from Erasmus University Rotterdam.His research focuses on management innovation and strategies for outsourcing andoffshoring.


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