Organizational Learning and Innovation Affect on Performance

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1. Introduction

Organizations are in a continuous process of searching for strategies that would provide them with a competitive advantage. Efficiency in stable environments is achieved through standardized routines, division of labor and management control (Grant, 2005). However, recent changes in the business environment have compelled firms to search for new strategies for competitive edge as the conventional strategies have become obsolete (Chirico & Salvato, 2008). Economic globalization, which refers to integration of operations and markets in a borderless economic space (Johnson & Turner, 2003), and advances in information and communication technology (Hanna, 2010); are among the central environmental forces faced by contemporary organizations (Griffin & Moorhead, 2007; Roy, 2005).

In order to cope with the current external opportunities and threats, it is argued that organizations have to learn, that is, acquire new knowledge and skills that will improve their existing and future performance (Child, Faulkner, & Tallman, 2005; DiBella, 1998; Ortenblad, 2001). In fact, it is proposed that the only competitive advantage future companies will have is the ability of their managers to learn faster than competitors (Geus, 1988). Many other researchers suggest that the effective strategy for sustaining and improving a firm’s competitive edge and performance is organizational learning (e.g. Mavondo, Chimhanzi, & Stewart, 2005; Senge, 1990; Sinkula, Baker, & Noordewier, 1997).

Scholars also attest that new knowledge and skills obtained through learning enhance firm’s innovative capabilities thus improving the level of firms’ competitiveness and performance (Baker & Sinkula, 1999; Huber, 1991; Keiser & Koch, 2008; Nonaka, 1994). Research shows that innovation is linked to the concepts of generation, acceptance, and implementation of new ideas, processes, products and services (Damanpour, 1991; Drucker, 2002), and is determined by the firm’s learning orientation (Baker & Sinkula, 1999; Calantone, Cavusgil, & Zhao, 2002). Research also indicates that the effect of organizational learning on firm performance is likely to be both direct and indirect because the creation of innovative culture through learning allows firm to achieve a better competitive position and above-average performance (Baker & Sinkula, 1999; Bates & Khasawneh, 2005; Huber, 1991

In this study we examine the impact of organizational learning and innovation on performance.

1.1. Organizational Learning:
Commitment to learning

Shared Vision
Organizational Learning
Intra-organizational knowledge sharing

Developing organizational knowledge and integrating that knowledge into everyday practice can be a powerful tool for multiplying an organization’s impact, especially as it grows. But a nonprofit doesn’t have to be a multisite, multimillion-dollar agency, or even have a dedicated knowledge management function, to benefit from clear goals, incentives, and well-developed processes for organizational learning. If you train your staff, circulate meeting minutes, share programmatic best practices across sites, measure the impact of your programs, discuss metrics with your board of directors to inform decisions, or present your results at professional conferences, you are practicing knowledge management. Indeed, one of the tricky aspects of this topic is that learning-related activities are varied and can sit in many different parts of an organization. In some organizations the locus of activity is in staff training; for others it may be in impact assessment or performance management. Wherever learning sits, the key is that it be closely connected to the organization’s mission and impact. Organizations need to focus on doing four things below are the four elements of organizational learning.

* First, leaders must champion organizational learning. They need to demonstrate their commitment by...
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