21/10/2011 How diversity in top management UTRECHT characteristics affects the innovation UNIVERSITY strategy of mobile phone producers MASTER THESIS Author: Remko Voorzaat Postal address: Zwaluw 14, 2411 ME Bodegraven E‐mail address: [email protected] Supervisor: Drs. Irene Troy Second reader: Dr. Jan Faber Number of ECTS: 45 Science & Innovation Management Department of Innovations Studies, Utrecht University The Netherlands Science & Innovation Management Master Thesis Remko Voorzaat (3037509) Abstract As innovation is becoming more and more important for both scientists and firms alike, much research is being put into better understanding all aspects of how innovation comes about and why some innovation projects are successful while others are not. However now that several studies have been conducted into understanding why some firms are better in translating their innovation strategy into successful products, it is time to think about the step which comes before that: the process of the strategy definition. This research uses the upper‐echelon theory to underpin the importance of the top management and investigates how the innovation strategy of a firm is affected by diversity within its top management team. As indicated in earlier literature, this relationship is assumed to be indirect due to the presence of some mediating variables which are included in this research. The firms chosen to be studied in this research are Nokia, Motorola and LG which are mobile phone producers. Since this is such a highly innovative industry there is a great need for high‐ quality innovation strategies. The research method of qualitative content analysis is used to examine the diversity in top management characteristics for these firms in the period of 2002‐2010 and their influences on the included mediating variables and ultimately on the defined innovation strategies. The results of this research show that diversity in top management team characteristics indeed has a profound effect on the innovation strategy as defined by the team. The task‐oriented dimension of diversity, which includes the indicators of top management team tenure, industry background, job background and firm tenure, has a clear and direct effect on a firm’s innovation strategies. A team with a higher degree of diversity in these indicators is better capable of defining high‐quality innovation strategies if this diversity is exploited through a medium degree of task conflict between the top managers. The relations‐oriented dimension of diversity, consisting of the indicators of gender, ethnicity and age, does not seem to have a direct influence on the innovation strategies of these firms. Only if a change in diversity of this dimension affects the task‐oriented dimension could any relationship be identified. Based on these findings, several important implications to scientists and firms interested in innovation are presented. 2 Science & Innovation Management Master Thesis Remko Voorzaat (3037509) Table of Contents Abstract ................................................................................................................................................... 2 Table of Contents .................................................................................................................................... 3 1. Introduction ......................................................................................................................................... 5 1.1 The upper‐echelon theory ............................................................................................................. 5 1.2 Relevance ...................................................................................................................................... 7 2. Context of the research ....................................................................................................................... 8 2.1 Components of mobile phones and innovation .......................................................................... 10 3. Theoretical framework ...................................................................................................................... 12 3.1 Defining an innovation strategy .................................................................................................. 12 3.2 Upper echelon theory ................................................................................................................. 13 3.2.1 Top management team diversity ......................................................................................... 14 3.2.2 The relationship between the upper echelon theory and innovation ................................. 14 3.2.3 Mediators ............................................................................................................................. 16 3.2.4 Moderators ........................................................................................................................... 18 3.2.5 Context variables to control ................................................................................................. 19 4. Methods ............................................................................................................................................ 20 4.1 The cases ..................................................................................................................................... 20 4.2 Operationalization ....................................................................................................................... 21 4.2.1 Control variables .................................................................................................................. 23 4.3 Collecting data ............................................................................................................................. 24 4.3.1 Overview of the data ............................................................................................................ 25 4.4 Data analysis method: Qualitative Content Analysis .................................................................. 26 4.4.1 Coding of the data ................................................................................................................ 27 5. Case 1: Nokia ..................................................................................................................................... 28 5.1 Influence of the moderators ....................................................................................................... 39 5.1 Summary of the analysis ............................................................................................................. 41 6. Case 2: Motorola ............................................................................................................................... 44 6.1 Influence of the moderators ....................................................................................................... 54 6.2 Summary of the analysis ............................................................................................................. 55 7. Case 3: LG .......................................................................................................................................... 58 7.1 Influence of the moderators ....................................................................................................... 67 7.2 A summary of the analysis .......................................................................................................... 69 8. Between‐case analysis ....................................................................................................................... 72 3 Science & Innovation Management Master Thesis Remko Voorzaat (3037509) 8.1 Effects of diversity ....................................................................................................................... 72 8.2 Mediators influencing each other ............................................................................................... 76 8.3 Influence of the moderators ....................................................................................................... 78 8.4 Additional findings ....................................................................................................................... 80 9. Discussion .......................................................................................................................................... 81 10. Conclusions ...................................................................................................................................... 83 10.1 Generalization and implications ................................................................................................ 85 11. Literature ......................................................................................................................................... 88 Appendix 1: The operationalization table ........................................................................................... 101 Appendix 2: TMT members characteristics of Nokia .......................................................................... 102 Appendix 3: TMT members characteristics of Motorola .................................................................... 105 Appendix 4: TMT members characteristics of LG................................................................................ 108 4 Science & Innovation Management Master Thesis Remko Voorzaat (3037509) 1. Introduction