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Innovation is the key to organizational survival and therefore the study of processes that support innovation should be of interest to researchers and practitioners alike. Schein's multi-layered model of organizational culture offers a useful framework for thinking about processes that foster innovation. A defining characteristic of the model is the subtle but important distinctions between the varied “layers” of organizational culture (i.e., values and norms, artifacts and behaviors). The basic assumption of this study is that Schein's model offers a tractable explanation of cultural processes that support organizational innovation, especially in service firms. Despite the intuitive appeal and practical value of Schein's conceptual framework, empirical research in relation to the model is limited. This paper develops a rationale for an empirical model based on Schein's conceptual model; the study reports a test of an empirical model. Data collected from approximately 100 principals of law firms provides a suitable empirical context for a test of the model. The findings generally support the hypothesized relationships. A key result is how layers of organizational culture, particularly norms, artifacts, and innovative behaviors, partially mediate the effects of values that support innovation on measures of firm performance. The findings have implications for theory and practice, especially in relation to building an organizational culture within professional service firms that fosters innovative behavior.
Innovation is a prerequisite for success in increasingly dynamic and competitive markets. In the service economy of the 21st century, firms compete on their service products and processes, and on their solutions, strategies, and service delivery. In professional service firms in particular, a culture of innovation is a crucial precursor to the types of innovative behaviors that can sustain organizations and foster organizational renewal. Organizations are social as well as physical constructions and therefore an understanding of organizational culture can help to shape the process of innovation and firm performance. Schein's model provides a framework for thinking about organizational culture and fostering cultures of innovation. Building on this framework, this study establishes an empirical model for how distinct layers of organizational culture can support the types of innovative behaviors that are so crucial to firm performance. The tests reported here are generally supportive of the core hypotheses; that is, the distinct layers of organizational culture (partially) mediate the effects of values that support innovation on firm performance.