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16th International Conference on Wirtschaftsinformatik,
March 2021, Essen, Germany
Digital Innovation Culture:
A Systematic Literature Review
Daniel Kiefer1, Clemens van Dinther1, and Julian Spitzmüller,2
1 ESB Business School, Reutlingen University, Reutlingen, Germany
{Daniel.Kiefer,Clemens.Van_Dinther}@Reutlingen-University.de
2 itdesign GmbH, Tübingen, Germany
{Julian.Spitzmueller}@itdesign.de
Abstract. Digitalization increases the pressure for companies to innovate. While
current research on digital transformation mostly focuses on technological and
management aspects, less attention has been paid to organizational culture and
its influence on digital innovations. The purpose of this paper is to identify the
characteristics of organizational culture that foster digital innovations. Based on
a systematic literature review on three scholarly databases, we initially found 778
articles that were then narrowed down to a total number of 23 relevant articles
through a methodical approach. After analyzing these articles, we determine nine
characteristics of organizational culture that foster digital innovations: corporate
entrepreneurship, digital awareness and necessity of innovations, digital skills
and resources, ecosystem orientation, employee participation, agility and
organizational structures, error culture and risk-taking, internal knowledge
sharing and collaboration, customer and market orientation as well as open-
mindedness and willingness to learn.
Keywords: Digital, Innovation, Culture, Organization, Transformation
1 Introduction
Many companies are still overwhelmed by digital transformation, in particular when it
comes to proactive behavior and discussing its actual impact and potentials for
companies [1]. Innovation has always played a crucial role for competitive advantage
and corporate success [2, 3]. It can be used to adapt to changes in the business
environment and to meet customer needs [4]. Likewise, the requirements for
innovations have changed over the past few years: the increased intensity of
competition, technological development and changing customer needs result in
shortened product lifecycles [5]. Consequently, there is increased pressure to create
innovations in companies in a more effective and efficient way.
Creating these innovations in the digital era is a serious challenge for companies that
cannot be solved easily. Innovation culture is mentioned as a key driver to manage
digital transformation [6]. New digital products, services, business models or
ecosystems need an organizational culture that creates and fosters these digital
innovations [7]. Therefore, many companies have already introduced new concepts and
methods such as agile project management or design thinking in order to encourage
digital innovations. However, in order to manage its digital transformation and to be
successful and innovative in the digital age, a company might need much more than
just a digital strategy and the usage of new technology and methods. Changing the
organizational culture in favor of the digital transformation implies a radical change in
the way people think, behave and collaborate in companies, how they generate ideas
and how they make decisions.
Nevertheless, the concrete design of a digital innovation culture and its
characteristics are still unclear [8–10]. Research on both organizational and innovation
culture has a long tradition and offers a variety of definitions, models and studies [5,
11]. However, current research does not consider the changes due to digitalization that
were mentioned in the beginning of this article. Moreover, most research of digital
transformation focuses on the technological or economical aspects (such as business
model innovation or ecosystems) and miss out on the cultural aspect [12]. But
organizational culture has always been a high obstacle for business transformations and
many sophisticated strategies have failed to overcome this obstacle.
Only [9] and [10] address the topic of digital innovation in the context of
organizational culture. [9] conducted a Delphi study in where he interviewed
participants from companies to identify cultural values for digital transformation. [10]
collected data through exploratory case studies and pictured it on culture levels from
[13] (e.g. artifacts). But both lack of general expressiveness regarding digital innovation
culture. This is due to the limited method of the studies and the small frame of reference
([9]interviewed twenty five German employees from various industries and [10]
analyzed German case studies). This shows that the topic has received little attention in
the scientific community so far. [14] recently noted: “that because of the shift in the
locus of innovation and because some of our core organizing axioms may be challenged
or fundamentally changed by the digital revolution, the nature of innovation and
organizational scholarship may be at a transition point.”
This is why, we strongly believe that digitalization will change more than products,
technologies, processes and strategies. To a greater extent and starting one step prior,
we think that companies will nurture ongoing digital innovations by creating a suitable
organizational culture. Consequently, we are exploring the characteristics of
organizational culture that benefit digital innovations. This leads to the following
research question:
─ RQ: What characteristics should an organizational culture have to foster digital
innovations?
To answer this research question, we have conducted a systematic literature review.
The structure of the paper is as follows: First, the theoretical context of innovation,
organizational culture and digital transformation is explained. Second, the literature
review, its methodology and its results are presented. Third, we discuss the results and
limitations of the literature review as well as its implications for future research.
2 Theoretical Context and Boundaries
As outlined in the introduction, the three aspects “Innovation”, “Digital
Transformation” and “Organizational Culture” form the context of our research (Figure
1). The innovation aspect deals with the question of how innovations can be fostered.
Digital transformation determines the context in which these innovations happen.
Organizational culture addresses the practiced patterns, approaches and values in form
of characteristics. Finally, “Digital Innovation Culture” is the subject of our research.
In the following section, we will briefly define these terms.
Figure 1. Overall context of digital innovation culture
Innovation refers to the usage of novel ideas, products, services, processes that are new
to the implementing organization and create an advantage for the organization [4].
Digital transformation describes the transformation of organizations that is based on
the usage of digital technology and radically changes business operations and value
creation [15]. According to [16], digital innovations are characterized as “the carrying
out of new combinations of digital and physical components to produce novel
products”. As we do not see digital innovations limited to products only (e.g. services
and business models), we define digital innovations as innovations that are enabled by
digital technologies.
Following [13], organizational culture is “a pattern of shared basic assumptions that
was learned by a group as it solved its problems of external adaptation and internal
integration, that has worked well enough to be considered valid and, therefore, to be
taught to new members as the correct way to perceive, think, and feel in relation to
those problems”. Moreover, [13] provides a model to describe and analyze
organizational culture which consists of three levels: artifacts, espoused beliefs and
values as well as underlying assumptions. Whereas artifacts are characterized as being
observable (e.g. organizational structures, processes, clothing, and stories), espoused
beliefs and values deal with the strategies, goals, norms and moral principles in an
organization. Underlying assumptions are beliefs that are taken-for-granted and
unconscious. They are widely accepted within an organization and people do not
question them anymore.
These three aspects set our research boundaries for the literature review and explain
the context of our search. By looking at the overlap of all three aspects (Fig. 1), we can
clarify the construct “Digital Innovation Culture”. Consequently, we define digital
innovation culture as an organizational culture that fosters digital innovations.
3 Research Method
In order to identify how a digital innovation culture looks like, we followed the
approach for literature reviews suggested by [17, 18]. Fig. 2. illustrates the seven-step
search process that was conducted as part of this literature review to identify
characteristics that foster a digital innovation culture.
The actual literature search process was started after the framework conditions were
set within the first and second step according to the defined research question from
chapter 1. The extraction log is the basis of the literature search. All necessary
information is stored in it and which is used for the final matrix. The matrix consists of
articles that are considered relevant. Based on these articles the research question is
answered step by step. The keyword search process (step 3) consists of several
iterations. The actual analysis and evaluation of the literature consists of the title and
abstract analysis (step 4) as well as the full text analysis (step 5). The result is the final
extraction log, which is used as the basis for the matrix. It should be emphasized that
forward and backward searches were also part of the literature search strategy in this
contribution (step 6). The results of the individual process steps as well as the number
of identified articles after the various search iterations are presented in the following
chapters.
Figure 2. Process of literature research [17, 18]
3.1 Literature Search
Based on the research question formulated in chapter 1, first articles were collected in
journals and databases to derive suitable keywords for the search query. The aspects
from Fig. 1 were also used to derive relevant keywords for the comprehensive search.
Digital innovation is an emerging research field, which is why we also included IS
conference proceedings of the AIS eLibrary. Our search is limited to peer-reviewed
articles
1
.
1
As we received few results in the AIS eLibrary, we also included non-peer-reviewed articles
of this database only.
We conducted our search in July and August 2020 on the scholarly databases EBSCO
and Web of Science, which are recommended by [19–21]. The search was focused on
the “title” and “abstract” fields. The language of the articles is limited to English and
German. Our final search query is as follows:
(digit*) AND (innovat* OR creativ*) AND (cultur* OR organization) AND
(compan* or firm or business) (1)
3.2 Literature Evaluation
By following these steps, our search resulted in an initial set of 778 contributions.
After removing duplicates (82) and articles in other languages than English and
German (58), we had 683 remaining articles.
In the next phase the contributions were analyzed of their suitability based by their
title. We were able to exclude most of these articles when we went through the titles.
By analyzing their abstracts and conclusions we had a closer look whether they could
help to answer our research question. After we went through the articles, a finding was
that that many articles deal with the impact of digitalization on national culture or on
culture industry. Another area was e-government. Those papers were excluded from
the analysis because the focus lies on companies (see selection criteria 3.2).
After this stage, 123 potentially relevant articles remained which were then read
carefully in the fourth phase of our selection (see literature analysis process in Fig. 3).
Figure 3. Resulting papers from the literature analysis process
For the selection of the encountered and remaining articles, we established the
following inclusion criteria, whereby all three must be fulfilled:
1. Articles must have a focus on digital transformation.
2. Articles must address digital innovation.
3. Articles must deal with organizational culture in companies or at least parts of it.
Those inclusion criteria reduced the number of articles to 19. Finally, a forward and
backward search lead to four additional articles which makes 23 relevant contributions
in total.
3.3 Literature Analysis and Synthesis
The relevant 23 articles were analyzed with regard to our research question. Fig. 4
illustrates the procedure based on the recommendations of [17].
Figure 4. Exemplary illustration of the literature analysis and synthesis based on [17]
As a first step, all 23 articles were carefully read again and the aspects or characteristics
described or mentioned by the authors, which promote a digital innovation culture, were
listed in a table
2
with 108 entries at the end.
In a second step the characteristics considered important, which were listed in the
table, were compared with each other. It became apparent that the different authors use
different names for the same relevant characteristics (e.g. entrepreneurship [9],
entrepreneurial orientation [22] and startup mentality [10], etc.).
In a third iterative step, the equivalent entries – key aspects of the articles to foster
digital innovation culture – were classified, clustered and unified in categories
(characteristics). As an output nine characteristics of organizational culture that were
in some way considered important for a digital innovation culture in the articles were
derived.
In a fourth step, a matrix was developed that shows which article mentions specific
characteristics relevant to the fostering of a digital innovation culture (Table 1, Chapter
4). It should be taken into account that based on the sole frequency of naming a
characteristic, no evaluation can be made with regard to its importance compared to the
other characteristics. This is a core task for further research to conduct extensive studies
to measure the relevance of the individual characteristics.
2
MS Excel, a spreadsheet application, was utilized for the literature analysis and synthesis
process.
4 Results of the Literature Review
Table 1 compromise the results of the literature analysis and synthesis based on [17]
and gives an overview of the unified characteristics as well as in which paper they are
discussed (marked by “x” if mentioned in the respective article).
Table 1. Result of the literature review: mentioned characteristic per paper
Characteristic of organizational culture to foster digital innovation
Paper
Corporate Entrepreneurship
Digital Awareness and Necessity
of Innovations
Digital Skills and Resources
Ecosystem Orientation
Employee Participation, Agility
and Organizational Structures
Error Culture and Risk-Taking
Internal Knowledge Sharing and
Collaboration
Customer and Market Orientation
Open-Mindedness and
Willingness to Learn
Sum
[8]
x
x
x
x
x
x
x
7
[9]
x
x
x
x
x
x
x
x
8
[10]
x
x
x
x
x
x
x
x
8
[22]
x
x
x
x
4
[23]
x
x
x
x
x
x
6
[24]
x
x
x
x
4
[25]
x
1
[26]
x
x
x
3
[27]
x
x
x
x
x
x
6
[28]
x
x
x
x
x
5
[29]
x
x
x
x
x
5
[30]
x
x
x
x
4
[31]
x
x
x
x
4
[32]
x
x
x
x
x
x
6
[33]
x
x
x
x
x
x
6
[34]
x
x
x
x
x
x
6
[35]
x
x
x
x
x
x
6
[36]
x
x
x
x
x
x
x
7
[37]
x
x
x
x
4
[38]
x
x
x
x
x
5
[39]
x
x
x
x
x
5
[40]
x
x
x
x
x
x
x
7
[41]
x
x
x
x
x
x
x
7
Sum
8
15
16
11
18
13
13
14
16
The following figure 5 visualizes the results from table 1 graphically. Based on the
number of entries and the sum of the relevant articles, a percentage of the frequency
distribution of the respective organizational culture characteristic is calculated. This
does not reflect the importance of the characteristic in the organization compared to the
others, but shows which ones have been mentioned particularly frequently to foster
digital innovation. The result could be used in assessments to benchmark and display
the profile of the digital innovation culture of single organizations.
Figure 5. Characteristics to foster digital innovation culture
4.1 Corporate Entrepreneurship
Corporate Entrepreneurship was mentioned several times in the relevant articles. In
order to stay ahead of competitors, to be first to market and to grow, companies must
proactively identify new business opportunities [36]. Therefore, it is helpful to
encourage employees to find these new business opportunities [22]. Ideally, all
employees should become entrepreneurs [10, 23] This requires a shift of responsibilities
towards employees and also giving them more freedom and foster a digital innovation
culture [9, 34].
4.2 Digital Awareness and Necessity of Innovations
Another important characteristic is the awareness in the company regarding digital
transformation, its impact, threats and opportunities as well as the need for innovations.
This awareness begins at top management level [28, 33]. It is important that digital
transformation is taken seriously and that a clear strategy and mission contribute to a
common understanding within the company, stress the importance of digital
transformation and encourage employees to come up with new ideas and business
opportunities [27, 31, 32, 40] Putting that in one sentence: “True change needs true
authenticity” [40]. So, using new technologies or setting up innovation labs as an alibi
without a real purpose is not enough to become truly digital and innovative within the
digital transformation [35]. The necessity of innovations should be anchored in the
organizational culture of a company because innovation is one way for a company to
grow and to make improvements [9].
4.3 Digital Skills and Resources
Creating digital innovations requires several skills and resources. Companies might
want to evaluate employees’ technological competencies and offer opportunities to
enhance these competencies, develop completely new ones or hire new employees with
the wanted skills. In this context, it should be noted that some companies overestimate
their competencies, especially in the digital area. Missing resources and skills can also
be obtained from external partners in an ecosystem [10, 29, 30, 34, 40].
Looking at hard skills, data management and data analytics as well as several
associated domains (e.g. artificial intelligence, machine learning and statistical
modelling) were mentioned very often in the relevant articles for a successful digital
transformation [24, 38, 39, 41]. Besides these hard skills, soft skills are important, too.
Especially change management skills are useful [23].
4.4 Ecosystem Orientation
Innovations sometimes need external partners [27]. As resources and knowledge of
companies are limited [41], it might be useful to search for complementary capabilities
outside the company [36]. For example, traditional manufacturing companies could
therefore partner up with IT firms to equip products with digital components [10].
Digital platforms enable a value creation with other companies in digital ecosystems or
networks [32]. Especially when building end-to-end solutions for customers, an open
innovation approach is advantageous. Close collaboration with external partners
increases knowledge and provides heterogeneous resources. Paired with digital
awareness, this can lead to radical innovations [28]. For that reason, companies should
be willing to collaborate and share their knowledge with external partners in a network
that has a shared purpose [9, 31].
4.5 Employee Participation, Agility and Organizational Structures
A higher involvement of employees in decision making and more freedom might have
a positive impact on the success of innovative projects [32]. Many others argue in the
same way and say that employees should have more responsibilities, freedom and
opportunities to participate in decision making [9, 10, 22, 26]. This requires
transparency and an open discussion of innovation initiatives and possible solutions
[26, 40]. Furthermore, the employees’ involvement also helps to change their behavior.
By empowering employees, companies can profit from enhanced innovation processes
as well as from a faster ability to react to changes in the business environment.
Additionally, mutual decision making helps to eliminate silos within the company [10].
According to [37], agility (defined as operational and strategic flexibility together with
customer responsiveness) is crucial in order to adapt to changes in the business
environment and to foster digital innovation culture.
4.6 Error Culture and Risk-Taking
In times of digital transformation, it is difficult to predict future changes in business
environment. It needs courage to fight this uncertainty [9, 23] .A willingness to take
risks is essential for companies to explore new opportunities and to experiment in order
to come up with new ideas [27, 40]. Without taking risks, companies might miss a
chance to create new innovations or to deliver them to the market. When exploring new
things and taking risks, some projects might go wrong and failure might occur but
where a risk is taken there is also the chance of new innovation. Instead of wasting
resources for too long on corrupted projects, failures should be admitted [35].
4.7 Internal Knowledge Sharing and Collaboration
The creation of new ideas and an increased participation of employees in innovation
initiatives demand for knowledge sharing and a closer collaboration within the
company across all business units and hierarchical levels [9, 10, 22, 40]. Therefore, the
partly dominating silo mentality in companies must be abolished [26, 27, 39]. An
integration of IT departments and business departments should especially be intended,
as IT drives and enables digital transformation [10, 33, 35]. A close collaboration across
business units also enables an identification of shared interests among employees and
their special qualifications [26].
4.8 Customer and Market Orientation
Digital transformation might also have an impact on how companies create value. This
characteristic addresses the customer orientation in value creation and companies’
attention to changes in the market such as emerging technologies and competitors. Not
reacting to market changes clearly makes digital transformation very difficult [35].
Some companies also fear losing their customers to competitors if they cannot offer the
demanded digital products and services [10]. Therefore, customer centricity is crucial
for businesses which means to address customer needs and align new products and
services with them [9, 39]. Some articles even go one step further and talk about
customer integration or value co-creation. This means that customers are directly
involved in innovation processes and work together on new products and services [10,
25, 34].
4.9 Open-Mindedness and Willingness to Learn
Digital transformation might cause and require radical changes. Whether a company
deals with those changes successfully also depends on the attitude of their employees
and their willingness to change and learn as well as their acceptance of new ideas.
Emerging technologies require open-mindedness and, as mentioned before,
sometimes it is necessary to question the existing business model, assumptions and
competencies [22, 25, 28, 35, 36]. Companies should encourage lateral thinking, out-
of-the-box thinking and curiosity [38, 40]. According to most articles in this literature
review, it is highly crucial that employees are open to change and willing to learn and
develop [8, 10, 23, 25, 26, 32, 34, 35].
5 Discussion and Implications for Future Research
The characteristics outlined for fostering a digital innovation culture were synthesized
on the basis of established papers and explained in more detail. Most of the identified
articles do not explicitly focus on organizational culture and how it can foster digital
innovations and even fewer articles specifically talk about digital innovation culture.
However, all articles had at least some aspects regarding organizational culture that are
related to our research question and helped us to identify the characteristics above. A
broad and comprehensive framework that explicitly addresses most of these
characteristics in a holistic approach is nonexistent. First attempts were delivered by
[9] and [10].When we reviewed the papers, one discovery was that many articles dealt
with the impact of digitization on national culture, the culture industry, as well as e-
government. Considerably fewer dealt directly about companies.
When comparing our derived characteristics to foster a digital innovation culture in
organizations with relevant research on the culture of innovation in organizations, it is
evident that they overlap in some areas.
For example, market orientation on the one hand and customer and market
orientation on the other hand. At the same time, however [42] lacks a clear reference to
corporate entrepreneurship, digital awareness, error culture and risk-taking as well as
ecosystem orientation. All of which play a decisive role in the promotion of digital
innovations. The following Table 2 compares [42] identified characteristics for
fostering an Innovation Culture with our characteristics for fostering a digital
innovation culture.
Table 2. Comparison of Innovation Culture and Digital Innovation Culture Characteristics
Innovation Culture [42]
Digital Innovation Culture
Innovation Propensity
Corporate Entrepreneurship
Organizational Constituency
Employee Participation, Agility and
Organizational Structures
Creative and Empowerment
Error Culture and Risk-Taking
Organizational Learning
Open-Mindedness and Willingness to
Learn
Market Orientation
Customer and Market Orientation
Value Orientation
Customer and Market Orientation
Implementation Context
-
-
Ecosystem Orientation
-
Digital Awareness and Necessity of
Innovations
-
Digital Skills and Resources
-
Internal Knowledge Sharing and
Collaboration
The following Table 3 gives a summary of the characteristics and why each of them
should receive more attention in order to foster digital innovations in organizations.
More questions regarding further research could address the concrete design of these
characteristics and how they can be managed and implemented in corporate practice.
Additionally, the correlation among the identified characteristics should be
investigated. The importance of particular characteristics might vary and should be
object of future research.
Companies from the “old world”, whose current focus or core competences are not
associated with digital innovation, might especially profit from a framework that helps
to transform the organizational culture and foster digital innovations. This problem
should be considered in future studies. Appropriate questions for each characteristic
were developed as a first step towards creating such a framework (Table 3).
Table 3. Characteristics, Digital Relevance and Future Research Questions
Characteristic
Digital Relevance
Future Research Questions
Corporate
Entrepreneurship
Enhance proactivity;
foster idea generation and
innovations
What skills should a corporate
entrepreneur have to create
digital innovations?
Digital
Awareness and
Necessity of
Innovations
Justifies upcoming
changes and explains the
need for innovations
How can companies achieve this
awareness and create a common
understanding?
Digital Skills and
Resources
Especially IT related skills
are required
How should companies evaluate
their competencies and identify
missing skills?
Ecosystem
Orientation
Necessary to create
innovative end-to-end
solutions for customer
How can a company find
appropriate partners and
integrate them in a digital
ecosystem?
Employee
Participation,
Agility and
Organizational
Structures
Fast changes in business
environment require
agility, flexibility and fast
decision making
How should companies deal with
radical innovations and
disruptive technologies? Is it
possible to avoid spin-offs?
Error Culture and
Risk-Taking
Enhance proactivity;
promote learning;
encourage experiments
(e.g. with new
technologies) and efficient
innovations
What general conditions do
companies have to meet in order
to encourage experiments and
change employees’ minds as
well as their behavior?
Internal
Knowledge
Sharing and
Collaboration
Cross-functional
collaboration fosters
digital innovations and
creates synergies
How can companies abolish silos
and create a collaborative
climate across business units?
How can this knowledge
exchange be managed and
recorded?
Customer and
Market
Orientation
Ensure customer value;
data analytics enable new
services and business
models
How can companies manage the
balancing act between market-
pull and innovation-push?
Open-
Mindedness and
Willingness to
Learn
Learning is crucial for the
success of digital
transformation; new
methods, skills and
partners are needed which
requires open-mindedness
This long-lasting and radical
change in employees’ minds is
difficult to accomplish. How can
companies establish this new
way of thinking?
6 Conclusion and Limitations
Innovations are crucial for companies to manage digital transformation successfully.
The organizational culture of a company has a great impact on the creation of these
digital innovations. The contribution of this paper is novel and relevant for research and
practice. The established research question has been answered by identifying and
describing characteristics of organizational culture that foster digital innovations on the
basis of established literature. At the same time, the term "Digital Innovation Culture"
was introduced to emphasize the importance of such a cultural approach to digital
transformation and innovation.
However, there are also limiting aspects regarding the results for several reasons.
First, the findings are limited to the articles that were taken into account for this
literature review. The selected scholarly databases as well as our key word search and
literature selection restrict the list of articles in a certain and a subjective way that we
are aware of. Second, it is possible to cluster the key aspects of the relevant articles in
other ways. Therefore, our identified characteristics might neither be perfect nor do we
claim their completeness.
Based on the insights of this paper, empirical research in companies can help to
elaborate the characteristics, to conceptualize digital innovation culture and to identify
management challenges in this area.
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