Many factors contribute to creating an organizational environment that effectively supports innovation and creativity. We address only a few key factors that we believe have the greatest effect on innovation. Besides the positive effect that each contributes individually, synergies may result from them being present together. As factors are combined, they lead to the creation of environments or cultures of innovation that are unique to firms, and become more valuable together than any one is on its own.28

Organizational Culture

It has long been observed that organizational culture or environment is a key contributor to innovation,2 9 and that failing to create the right environments is a critical barrier to effective innovation.30 "A mediocre company may have a strong but rigid culture transmitted by a fear-based boss, or wishy-washy culture promulgated by a leader with no firm business or moral vision. An excellent organization is one in which the founders build on a strong vision to take active steps to create an atmosphere in which innovation can prosper."31 Organizations are the result of a group or groups of people working toward a common goal, and creativity and innovation are the result of interactions between individuals and a particular situation.32 It is important to understand the difference between innovation and creativity. Creativity is the individual-level generation of new ideas whereas innovation is the method through which creative ideas evolve into something of value.33 If individuals perceive that their environment encourages and rewards creativity, they will engage in more creative behaviors that lead to organizational level innovations.34 A key difference between creativity and innovation is that innovation is only beneficial to the extent that it adds perceived value to a product or service, whereas creativity is the result of, and results in, intrinsic motivation and innovation. Creativity can be beneficial in and of itself simply by generating new approaches to a situation. Innovations must, however, result in distinct, observable, and consistent addition of value. If innovation is the goal and creativity is the avenue, how can an organization create an environment that can transform creative ideas into successful innovations?

Tacit Knowledge, Resources, and Capabilities

According to Ikujiro Nonaka, there are two basic routes to obtaining tacit knowledge.35 One is through association with someone else who possesses the desired tacit knowledge—akin to a master/apprentice relationship—whereby there are opportunities for instruction, observation, mimicry, feedback, and practice. The second starts with explicit knowledge (e.g., written instructions) that is slowly transformed into tacit knowledge through a process akin to trial and error and repeated self-directed practice. This route is less efficient and occurs more slowly than the first, but may be the only route available if a relationship with the tacit knowledge holder is not possible. Applying Nonaka's logic, we can conclude that chefs obtain their tacit knowledge, skills, and abilities either by learning them from an experienced chef, through trial and error, or by some combination of the two. However, although this explains how they acquire their tacit knowledge, it does not explain why one chef is able to achieve a competitive advantage over others. The explanation for this can be found in the innate abilities of the individuals and the innovation environment, which includes its structure and leadership, in which they have nurtured their skills.36

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