Procedia - Social and Behavioral Sciences
Volume 224, 15 June 2016, Pages 317–324
IRSSM-6 The 6th International Research Symposium in Service Management — “Service Imperatives in the New Economy: Service Excellence for Sustainability”
2. 318 Hamzani Fadil et al. / Procedia - Social and Behavioral Sciences 224 (2016) 317 – 324
pointed that organizational innovation is implemented in order to increase operational efficiency, employees’
satisfaction or a firm’s innovativeness, whereby it intends to increase a firm’s performance by reducing costs
(administrative and supplies), improving workplace satisfaction and labour productivity. Thus, organizational
innovation here can be seen as an effective way to increase internal service quality. It is closely related to
employees’ satisfaction (Steiber, 2012) and it shows that organizational innovation definitely can lead to
competitiveness (Steiber, 2012; Armbruster et al., 2008).
Apart from that, there are three main determinants of innovation that are very vital for the comprehensive
framework of organizational innovation, namely, innovation leadership, managerial levers, and business processes
(Crossan & Apaydin, 2010). These determinants are useful to examine the level of organizational innovation in the
organization especially in public agency. In regards to innovation in public agency, ANAO (2009) defined it as the
creation and implementation of new processes, products, services and methods of delivery, which results in
significant improvements in efficiency, effectiveness or quality of outcomes. Therefore, many departments and
agencies have already identified innovation as a value to be encouraged and it is given a real meaning through
executive leadership.
In the case of Malaysia, the issues regarding skills, creativity and innovation have become increasingly important
drivers of the public sector transformation agenda as it embarks on several strategic national initiatives predicated
upon the principles of 1Malaysia with the focus on People First, Performance Now, (MAMPU, 2011). According to
MAMPU (2011), in this highly competitive global environment, the Malaysian civil service needs to focus on
innovation to achieve transformational changes. It is a key to the successful implementation of the government
transformation initiatives, such as the 1Malaysia concept, Government Transformation Programme (GTP),
Economic Transformation Programme (ETP), New Economic Model (NEM) and Tenth Malaysia Plan. Therefore,
it is vital for the government to promote a creative and innovative culture at all levels of administration including
departments and units since this can ensure employees’ satisfaction (internal service quality), which can be achieved
and will eventually lead to high external customers’ satisfaction (external service quality).
In simple words, organizational innovation is essential to enhance internal service quality, whereby it will
eventually lead to external service quality and effectiveness, efficiency as well as competitiveness in providing
services. Thus, public agencies must emphasize innovation, specifically organizational innovation in enhancing their
internal service quality. In this case, internal service quality is defined as employees’ satisfaction that can be
achieved from internal service providers (Hallowell et al., 1996). In detail, all employees, units and departments are
users and providers of services and they participate in a producer or customer relationship and each of them is
supposed to offer fellow employees good quality services (internal service quality) so as to achieve better
performance and provide good quality services to external customers (external service quality).
Previously, Lin (2010) stated that majority of the firms have focused on building relationship with external
customers in terms of identifying and satisfying their needs and requirements, while employees as internal
customers (Sasser & Arbeit, 1976) have received very little attention from the firms. However, satisfying
employees by providing internal quality services is now becoming a part of companies’ strategy (Lin, 2010) because
it is critical since improvements in internal service quality are expected to produce improved external service quality
and the relationships between employees within an organization are a prerequisite for successful interactions with
external customers (Gi-Du et al., 2002). This is in line with Hallowell et al. (1996), Lin (2010) and Jarvi (2012),
who stated that in order to satisfy its external customers, the organization must first satisfy its own employees.
Therefore, this paper proposes a framework that determines the relationship of organizational innovation and
internal service quality by using gender as the moderating variable and MBKS is chosen to test the framework.
2. Three vital determinants of organizational innovation
2.1. Innovation leadership
Innovation leadership is a meta-construct consolidating individual and group level variables (Crossan &
Apaydin, 2010). This means that, leaders have significant influences towards the introduction and implementation
of innovation in the organization. As stated by West et al. (2003), leaders’ support and guidance are vital in
promoting innovative efforts at the initial creative stage since it contributes to effective interactions among group
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members. Apart from that, equally important is leaders’ ability to create conditions for the subsequent
implementation of innovation (Mumford & Licuanan, 2004). In addition, Mumford et al. (2002) argued that to lead
creative efforts, the leaders must possess substantial technical and professional expertise and creative skills as well
as the ability to process complex information. Moreover, the leaders also must have the motivation to exercise this
ability (Crossan & Apaydin, 2010) and it partially depends on the leaders’ perception of environmental threats and
opportunities (Sternberg et al., 2003). On this note, Crossan and Apaydin (2010) also categorised leaders’ ability and
motivation to innovate into two groups of factors of which are individual (CEO) and group (Top Management Team
and Board Governance).
On the individual level, the factor includes tolerance of ambiguity, originality, independence (Patterson, 1999;
Crossan & Apaydin, 2010), self-confidence, authoritarianism, unconventionality, determination to succeed,
managerial tolerance of change (Crossan & Apaydin, 2010), openness to experience (George & Zhou, 2001;
Patterson, 1999; Crossan & Apaydin, 2010), rule governess (Frese et al., 1999; Crossan & Apaydin, 2010),
proactivity (Seibert et al., 2001), intrinsic attribution bias (Frese et al., 1999; Crossan & Apaydin, 2010) and
personal initiative (Frese & Zapf, 1994).
On the group level, composition and characteristics of the top management team yield a stronger explanation of
organizational outcomes than a leader’s characteristics alone including amount of education and age (Hambrick &
Mason, 1984; Crossan & Apaydin, 2010), tenure, diversity of background and experience and extra-industry ties
(Crossan & Apaydin, 2010).
2.2. Managerial levers
Managerial levers are meta-construct consolidating firm-level variables that support innovation. They are a
dynamic strain of the resource-based view that draws on evolutionary economics based on which different resource
bases among firms provide the source of variation for innovations (Crossan & Apaydin, 2010). The firm is
supposed to combine exploitation of the existing resources while explore for new opportunities, which means that –
the firm also should develop new and valuable resources and capabilities, which takes time, investment, and
managerial efforts (Crossan & Apaydin, 2010).
According to Crossan and Apaydin (2010), there are five types of managerial levers, namely,
missions/goals/strategies, structures and systems, resource allocation, organizational learning and knowledge
management tools, as well as organizational culture. In relation to this, organizational mission and strategy establish
the direction for the organization to follow (Adams et al., 2006; Crossan & Apaydin, 2010), whereas physical and
financial resources, organizational structure, and management and communication systems provide the necessary
supports for innovation practices (Damanpour, 1991; Crossan & Apaydin, 2010). Meanhwile, organizational
learning and knowledge management tools (Crossan et al., 1999; Crossan & Apaydin, 2010), as well as
organizational culture (West, 1990; Crossan & Apaydin, 2010) help maintain innovation processes.
An explicit innovation strategy (Crossan & Apaydin, 2010) is a primary managerial lever and it helps to match
innovation goals with the strategic objectives of the firm as stated by Tipping and Zeffren (1995). In terms of
structure and systems, they comprise organizational complexity and administrative intensity, specialization and
centralization (Damanpour, 1991; Crossan & Apaydin, 2010), formalization (Damanpour, 1991; West et al., 1998;
Crossan & Apaydin, 2010), matrix principles (Staw, 1990; Crossan & Apaydin, 2010), stratification, fit between
organizational design and type of innovation as well as number of employees (Crossan & Apaydin, 2010).
Meanwhile, resource allocation includes absolute and relative R&D intensity (Crossan & Apaydin, 2010),
commitment to differentiated funding (White, 2002; Crossan & Apaydin, 2010), annual turnover of resources
(Crossan & Apaydin, 2010), and slack resources (Damanpour, 1991; Crossan & Apaydin, 2010; O’Brien, 2003).
Next, leaders create a learning environment via providing support for experimentation (Damanpour, 1991; King
et al., 1992; West & Anderson, 1992; Crossan & Apaydin, 2010), being tolerant of failed ideas (Madjar et al., 2002;
Crossan & Apaydin, 2010), adopting risk-taking norms (King et al., 1992; West & Anderson, 1992; Crossan &
Apaydin, 2010), supporting learning and development of employees as well as by fostering the acceptance of
diversity within the group (Crossan & Hulland, 2002; Crossan & Apaydin, 2010). Then, knowledge management
tools include the usage of formal idea generation tools (Cebon & Newton, 1999; Loch et al., 1996; Crossan &
Apaydin, 2010), external linkages with universities (Atuahene-Gima, 1995; Crossan & Apaydin, 2010) and the
quality of these linkages (Cebon & Newton, 1999; Crossan & Apaydin, 2010), formal information gathering (Oliver
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et al., 1999; Crossan & Apaydin, 2010), as well as customer contact time and frequency (Lee et al., 1996; Crossan &
Apaydin, 2010).
Lastly, one more important factor which enables innovation as a process is organizational culture. In this case,
leaders create innovative culture by having a clearly stated, attainable, valuable shared vision, calculated risk taking
(West, 1990; Crossan & Apaydin, 2010), promoting autonomy (Amabile, 1998; Zien & Buckler, 1997; Crossan &
Apaydin, 2010), and motivation (Crossan & Apaydin, 2010).
2.3. Business processes
Business processes are meta-construct consolidating process-level variables that support innovation and they
study how organizational processes convert inputs into outputs. According to Crossan and Apaydin (2010), the term
process in the management literature is used to refer to the underlying logic that explains a causal relationship
between independent and dependent variables in a variance theory. It also refers to a category of concepts of
organizational actions, such as rates of communications, work flows, decision-making techniques, or methods for
strategy creation. It also refers to progression, which is the order and sequence of events in an organizational entity’s
existence over time. Crossan and Apaydin (2010) pointed out that similar inputs transformed by similar processes
will lead to similar outcomes, which means that – there are certain constant necessary conditions for the outcomes to
be reached. Thus, a process level explanation identifies the generative mechanisms that cause observed events to
happen in the real world and the particular circumstances or contingencies when these causal mechanisms operate
(Crossan & Apaydin, 2010).
In the context of innovation, these core processes include initiation, portfolio management, development and
implementation, project management, and commercialization. The initiation phase includes awareness and attitude
towards new ideas (Ettlie, 1980; Crossan & Apaydin, 2010) and concept generation (Chiesa et al., 1996; Crossan &
Apaydin, 2010). An innovation also can be initiated in an organization either by generation or adoption
(Gopalakrishnan & Damanpour, 1997; Crossan & Apaydin, 2010). The generation of innovation revolves around
problem solving and decision making related to the development of new products and processes (Crossan &
Apaydin, 2010; Wolfe, 1994). Meanwhile, for adoption of innovation, it is a process of induction of organizational
change from outside (Crossan & Apaydin, 2010; Wolfe, 1994). Organizations may engage in either one or both of
them, and as a result, an organization is believed to have a portfolio of innovation projects.
The focus of portfolio management is on-making strategic, technological, and resource choices that govern
project selection and the future shape of the organization (Crossan & Apaydin, 2010). Portfolio management is
important because of the rapidity at which resources are consumed in the innovation process (Cebon & Newton,
1999; Crossan & Apaydin, 2010). The effectiveness with which an organization manages its R&D portfolio is often
a key determinant of its competitive advantage (Crossan & Apaydin, 2010). Apart from that, portfolio management
also consists of considerations of risk return balance, such as ROI (Bard et al., 1988; Crossan & Apaydin, 2010),
constrained optimization to maximize output (Schmidt & Freeland, 1992; Crossan & Apaydin, 2010), and economic
and benefit models (Hall & Nauda, 1990; Crossan & Apaydin, 2010) and the usage of optimization tools (Cooper et
al., 2001; Crossan & Apaydin, 2010), formalized process of project selection (Cebon & Newton, 1999; Crossan &
Apaydin, 2010), project selection efficiency (Szakonyi, 1994; Crossan & Apaydin, 2010) and evaluation of post-hoc
project results (Lee et al., 1996; Crossan & Apaydin, 2010).
In terms of development and implementation of innovation, it sequentially follows innovation generation or an
adoption decision (Wolfe, 1994; Crossan & Apaydin, 2010). For project management, it is concerned with the
processes that turn the inputs into a marketable innovation and comprise both sequential and concurrent activities.
In this part, the key success factors of an effective innovation project management are project efficiency, tools,
communications, and collaboration as found by Adams et al. (2006). This project management also involves
utilization of formal project management tools, such as a problem finding solving cycle (Bessant, 2003; Crossan &
Apaydin, 2010), certified processes (Chiesa et al., 1996; Crossan & Apaydin, 2010), post launch evaluations
(Atuahene-Gima, 1995; Crossan & Apaydin, 2010), maintaining internal and external communications (Cebon &
Newton, 1999; Damanpour, 1991; Crossan & Apaydin, 2010), and collaboration within the team (Jassawalla &
Sashittal, 1999; Crossan & Apaydin, 2010), with customers (Von Hippel, 1986; Crossan & Apaydin, 2010), and
with suppliers (Bessant, 2003; Crossan & Apaydin, 2010).
Lastly, the final innovation process is commercialization. On this note, it actually involves the management and
administrative cores of the organization (Adams et al., 2006). Commercialization is concerned with making the
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innovative process or product a commercial success and it is important for the survival and growth of organizations.
This commercialization includes market research (Verhaeghe & Kfir, 2002; Crossan & Apaydin, 2010), budget for
market testing (Balachandra & Brockhoff, 1995; Crossan & Apaydin, 2010), marketing proficiency such as number
of product launches (Yoon & Lilien, 1985; Crossan & Apaydin, 2010), launch proficiency (Song & Parry, 1996;
Crossan & Apaydin, 2010), personnel proficiency, post-launch reviews (Atuahene-Gima, 1995; Crossan & Apaydin,
2010), as well as adherence to schedule (Griffin & Page, 1993; Crossan & Apaydin, 2010).
3. Five dimensions of internal service quality
Internal service quality is defined as the employees’ satisfaction that is achieved from internal service providers
(Hallowell et al., 1996). In this case, each individual in an organizational unit (service provider and user) is
supposed to offer fellow employees good-quality services so as to achieve better performance and provide good
quality services to customers. In order to measure internal service quality, Gi-Du et al. (2002) have modified
SERVQUAL or service quality dimensions that are previously introduced by Parasuraman et al. (1988) to where
necessary items have been reworded to capture internal rather than external service quality. This modified version
of SERVQUAL is called as SERVQUAL Battery or most known as Internal Service Quality Battery (ISQB). The
dimensions and items of ISQB are as stated below, and these five dimensions of internal service quality together
with organizational innovation when taken seriously into consideration definitely can help in enhancing the service
quality (internal and external), effectiveness, efficiency as well as competitiveness of the organization especially
public agencies.
Table 1. Five Dimensions of Internal Service Quality.
Dimension Item
Reliability Co-workers provide service that is promised.
Co-workers are dependable for handling my problems.
Co-workers perform services right the first time.
Co-workers provide correct and necessary information.
Co-workers are reliable.
Assurance I can trust my co-workers.
I feel safe in dealing with co-workers.
Co-workers are polite and kind.
Co-workers are knowledgeable.
Tangibles We have up-to date equipment.
Working environment is comfort and attractive.
Co-workers have a neat, professional appearance.
The materials used in the work place are visually appealing.
Empathy Co-workers are sincerely concerned about problems.
We have convenient working hours.
Co-workers give me individual attention.
Co-workers seem to have each other’s best interests in mind.
Co-workers are sensitive to my work-related needs.
Responsiveness My communication with co-workers is appropriate, accurate and clear.
Co-workers respond quickly and efficiently to my request.
Co-workers are willing to help me.
Co-workers are willing to accommodate special requests and needs.
4. Gender as a moderating factor
Gender is defined by Oxford Dictionaries (2014) as the state of being male or female typically used with
reference to social and cultural differences rather than biological ones. In this paper, gender acts as the moderator
that leads to different employees’ perceptions between male and female towards organizational innovation. Male
6. 322 Hamzani Fadil et al. / Procedia - Social and Behavioral Sciences 224 (2016) 317 – 324
employees might state that there are high levels of organizational innovation in the organization which definitely
leads to high levels of internal service quality of stated organization, while female employees will say vice versa.
Furthermore, gender also can strengthen innovation milieus and there is a positive relationship between gender
difference and the organization’s innovative capabilities (Brogren et al., 2011). Apart from this, several researchers
also argue that organizational innovation needs to be focused more on since this kind of innovation might be more
people-oriented and it is influenced by specific individual characteristics (Torchia et al., 2011; Galia & Zenou,
2013). In this case, it is believed that gender difference may influence positively the organizational innovation level
of the organization, whereby male and female employees may have different perceptions on it.
5. Theoretical framework
In order to investigate and better understand the influence of organizational innovation towards internal service
quality in Majlis Bandaraya Kuching Selatan (MBKS), the paper has proposed a new model called Innovative
Internal Service Quality (IISQ) Model, as shown in Fig. 1. The model actually applies the Resource-Based Theory
(RBT) that has been introduced by Barney (1991), where it indicates that internal service quality as a dependent
variable consists of five dimensions, namely, reliability, assurance, tangibles, empathy and responsiveness that can
be affected by three independent variables of organizational innovation, which are innovation leadership, managerial
levers and business processes. This means that, innovation leadership, managerial levers and business processes are
considered as the strategic resources with VRIN attributes (valuable, rare, inimitable and non-substitutable),
whereby they offer a sustainable competitive advantage to the organization (Barney, 1991; Warnier et al., 2013).
These independent variables are actually based on Crossan and Apaydin (2010) as the basis and then have been
combined with the determinants as mentioned by other previous researchers as stated in the literature review above.
In regards to this, Crossan and Apaydin (2010) stated that innovation leadership, managerial levers and business
processes definitely have significant influences towards the introduction and implementation of innovation in an
organization. In other words, they are significant determinants that support the organizational innovation and they
have significant influence towards the internal service quality of the organization, whereby high levels of
organizational innovation in the organization will lead to high levels of internal service quality and vice versa.
However, in this proposed model, there is also one factor that can influence the perception of employees on the level
of organizational innovation that can lead to high or low level of internal service quality. That particular factor is
gender. The framework shows that gender also will lead to the difference perception among male and female
employees towards the organizational innovation that influences the level of internal service quality. This means
that male may tend to admit that there are high levels of organizational innovation that may lead to high levels of
internal service quality in the organization, while female may say that there are low levels of organizational
innovation that may lead to low levels of internal service quality in the organization or vice versa.
Fig. 1. Innovative Internal Service Quality (IISQ) Model.
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6. Conclusion
This paper can help those who are interested in studying the influence of organizational innovation towards
internal service quality in Malaysian public agencies. Moreover, this paper also can help MBKS in providing
quality services to internal customers since it highlights not only on the organizational innovation, but also focuses
on internal service quality, in which if taken seriously can improve services by narrowing the gap between
employees’ (internal customers’) expectations and actual services provided by the organizational unit (internal
service provider). Therefore, this study can increase the knowledge and awareness of MBKS and other public
agencies on the significance of organizational innovation towards internal service quality so as to be more effective
and efficient in delivering internal services to its employees. Lastly, this paper is also important in proposing a new
model for organizational innovation and internal service quality, called as the Innovative Internal Service Quality
(IISQ) Model. This proposed model will help in explaining how the three main determinants of organizational
innovation can influence the internal service quality of the organization by placing gender as a moderating factor
that differentiates the employees’ perceptions on organizational innovation in the organization.
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