Sanchez Blandine and Fanise Nathan

Impact of Managerial Innovation

on Corporate Social Responsibility

IKEA Case Study Analysis

Business Administration Master’s Thesis

30 ECTS

Term: Spring 2013

Supervisor: Inger Roos

ACKNOWLEDGEMENTS

This Master thesis was written in spring 2013 as a final project for a Master in

Service Management at Karlstad University. Many people supported us in the

successful completion of our thesis. We would like to thank them for their

contributions to this academic paper. Foremost, we would like to take the

opportunity to acknowledge the assistance of Magnus Engstrand – Local IT

and Sustainability coordinator at IKEA Karlstad, who provided us with all the

necessary information to develop our thesis. We also wish to express our

sincere thanks to the employees and managers of the IKEA Karlstad store for

their cooperation. Finally, we wish to express our deep sense of gratitude to

Associate Professor Dr. Inger Roos who guided us with many valuable

suggestions during the writing of our thesis.

Blandine Sanchez

Nathan Fanise

Abstract

The purpose of this master thesis is to provide a deeper understanding of managerial innovation impact on companies through Corporate Social Responsibility (CSR). For this objective, IKEA Karlstad was chosen for the empirical part in order to apply the theoretical framework to practical relevance. The method used for this thesis was a case study design including data collection from literature in different databases: Emerald, Business Source Premier, Scopus as well as Google Scholar. Regarding data collection for the case study, three qualitative questionnaires were also distributed to IKEA: two designed for the local IT and sustainability coordinator Magnus Engstrand and one targeting employees. A quantitative questionnaire was distributed to IKEA employees too. An interview was set up with Magnus Engstrand according to the unstructured interview guidelines. The theoretical framework focuses not only on understanding the links between managerial innovation and CSR, managerial and technological innovations but also on the companies’ motivation to implement these actions and their impact on employees, organizations and community. From our analysis of the literature it can be stated that managerial innovation is stimulated by an internal element of the company. Managerial innovation helps partly or entirely to develop CSR actions resulting in the creation of positive value: tangible or intangible; or negative value according to value resonance or value dissonance. The case study analysis brought examples of how managerial innovation brings value without involvement of any technological innovation contradicting certain theories exposed in the theoretical framework. At IKEA, the three different types of managerial innovations are management, administrative and organizational innovations which are used to develop CSR actions and constitute a minor or major part of their implementation. The impact of managerial innovation on CSR is translated at IKEA Karlstad as an intangible value for the company and its stakeholders. This thesis contributes to a better comprehension of managerial innovation concepts in general as well as its application in a CSR strategy through concrete examples. It can also be used as a demonstration of how managerial innovation can be used to improve the internal and external images as well as employees’ welfare and perceptions. Further qualitative research is needed to measure the manner of managerial innovations as well as quantitative studies to generalize its impact on a larger scale. Keywords: Managerial innovation, technological innovation, innovation, corporate social responsibility, value, values, intangible value, tangible value, values resonance, values dissonance.

Table of Contents

1. INTRODUCTION ................................................................................................................ 1 1.1. BACKGROUND ........................................................................................................................... 1 1.2. PROBLEM IDENTIFICATION ..................................................................................................... 2 1.3. MOTIVATION OF THE STUDY................................................................................................... 3 1.4. PRESENTATION OF THE CASE STUDY..................................................................................... 4

1.4.1. General Presentation ...................................................................................................... 4 1.4.2. Vision and Values of IKEA Group .............................................................................. 5 1.4.3. Corporate Social Responsibility at IKEA................................................................ 6

1.5. THESIS OBJECTIVES .................................................................................................................. 6 1.6. THESIS PURPOSE....................................................................................................................... 7 1.7. THESIS STRUCTURE ................................................................................................................. 7

1.7.1. Chapter 2: Theoretical Framework ......................................................................... 7 1.7.2. Chapter 3: Methodology ................................................................................................ 8 1.7.3. Chapter 4: Presentation of the results .................................................................... 8 1.7.4. Chapter 5: Analysis and discussion of the case study results ....................... 8 1.7.5. Chapter 6: Conclusion .................................................................................................... 8

2. THEORETICAL FRAMEWORK ....................................................................................... 9 2.1. CONCEPT OF MANAGERIAL INNOVATION ........................................................................... 10

2.1.1. Definition of Management Innovation ................................................................ 10 2.1.2. Definition of Managerial Innovation ................................................................... 10 2.1.3. Links between Managerial Innovation and Management Innovation . 11

2.2. CONCEPT OF CORPORATE SOCIAL RESPONSIBILITY (CSR) ............................................ 12 2.2.1. Definition of CSR ............................................................................................................ 12 2.2.2. Links between CSR and Managerial Innovation ............................................. 13 2.2.3. Indicators to measure the value created by CSR ............................................ 13

2.3. DETERMINATION OF TECHNOLOGICAL INNOVATION AS A TRIGGER ELEMENT FOR

MANAGERIAL INNOVATION .................................................................................................................. 14 2.3.1. Technological Innovation is a key component of Managerial Innovation ............................................................................................................................................... 15 2.3.2. Technological Innovation requires Managerial Innovation to create value 15 2.3.3. Reflection on the positioning of Technological Innovation and Managerial Innovation ..................................................................................................................... 16 2.3.4. Technological Innovation as a trigger element of Managerial Innovation ............................................................................................................................................... 16 2.3.5. Reflection from Service Innovation literature ................................................. 17 2.3.6. Hypothesis 1: selection of the model..................................................................... 18

2.4. THE VALUE CONCEPT: RESULT OF MANAGERIAL INNOVATION ON CSR ....................... 18 2.4.1. Hypothesis 2: Tangible Value and Intangible Value ..................................... 18 2.4.2. Hypothesis 3: Values may drive value .................................................................. 19

2.5. COMPOSITION OF CORPORATE SOCIAL RESPONSIBILITY ................................................ 20 2.5.1. Corporate Philanthropy ............................................................................................. 20 2.5.2. Risk Management .......................................................................................................... 20 2.5.3. Creating Shared Value (CSV) ................................................................................... 21

3. RESEARCH METHODOLOGY ....................................................................................... 22 3.1. GENERAL KNOWLEDGE ABOUT RESEARCH METHODS ...................................................... 22 3.2. DATA COLLECTION ................................................................................................................. 23

3.2.1. Literature review ........................................................................................................... 23

3.2.2. Qualitative data ............................................................................................................. 23 3.2.3. Quantitative data .......................................................................................................... 24

3.3. MOTIVATION OF THE CASE STUDY DESIGN ......................................................................... 24 3.4. WHY IKEA? ............................................................................................................................ 25 3.5. RESEARCH QUESTIONS AND LIMITATIONS ........................................................................ 25 3.6. DISCUSSION OF VALIDITY AND RELIABILITY IN OUR THESIS ........................................... 26

4. PRESENTATION OF THE RESULTS ........................................................................... 27 4.1. CURRENT INDICATORS TO MEASURE CSR AT IKEA......................................................... 27 4.2. INNOVATION AT IKEA ........................................................................................................... 27 4.3. FOCUS ON THE IKEA STORE IN KARLSTAD, SWEDEN ...................................................... 27 4.4. PRESENTATION OF CSR ACTIONS INCLUDING MANAGERIAL INNOVATIONS AT IKEA 28

4.4.1. Nomination of Steve Howard as Chief Sustainability Officer and People & Planet Positive Project (PPP) .................................................................................................... 28 4.4.2. Universal Code of Conduct ........................................................................................ 29 4.4.3. IWAY .................................................................................................................................... 30 4.4.4. Shopkeepers ..................................................................................................................... 31 4.4.5. Samhall .............................................................................................................................. 32

4.5. INTERPRETATION OF THE ANSWERS FROM THE QUALITATIVE QUESTIONNAIRE ........ 32 4.6. ANSWERS FROM THE QUANTITATIVE QUESTIONNAIRE ................................................... 34

5. ANALYSIS AND DISCUSSION OF THE RESULTS .................................................... 38 5.1. ANALYSIS OF STEVE HOWARD’ EMPLOYMENT .................................................................. 38

5.1.1. A CSR strategy stimulus .............................................................................................. 38 5.1.2. Organizational Innovation is the only component of Steve Howard’ employment ............................................................................................................................................ 38 5.1.3. An impact represented by intangible value through values resonance. 39

5.2. ANALYSIS OF THE PEOPLE & PLANET POSITIVE PROJECT .............................................. 39 5.2.1. A CSR strategy stimulus .............................................................................................. 39 5.2.2. People & Planet Positive project involves both managerial innovation and technology ..................................................................................................................................... 40 5.2.3. Values resonance impacting IKEA employees’ behaviour .......................... 40

5.3. ANALYSIS OF THE CODE OF CONDUCT AND TRUST LINE ................................................. 41 5.3.1. A Corporate Culture stimulus .................................................................................. 41 5.3.2. A combination of administrative and organizational innovations........ 41 5.3.3. A value resonance resulting in a neutral impact on IKEA.......................... 42

5.4. ANALYSIS OF THE IWAY ....................................................................................................... 42 5.4.1. A CSR strategy stimulus .............................................................................................. 42 5.4.2. An administrative and organizational innovation ........................................ 43 5.4.3. A values resonance resulting in a decrease of the corruption .................. 43

5.5. ANALYSIS OF SHOPKEEPERS’ IMPLEMENTATION .............................................................. 44 5.5.1. Unified Leadership as a stimulus ........................................................................... 44 5.5.2. Organizational and management innovations as a central element of shopkeepers ............................................................................................................................................ 44 5.5.3. A positive impact reflected by an increase of trust among workings teams 44

5.6. ANALYSIS OF SAMHALL COLLABORATION .......................................................................... 45 5.6.1. A CSR strategy stimulus .............................................................................................. 45 5.6.2. An important contribution of management Innovation and organizational Innovation to improve CSR ............................................................................. 45 5.6.3. Positive impact on IKEA employees and the community due to values resonance 46

5.7. DISCUSSION OF THE CASE STUDY RESULTS ........................................................................ 46 5.7.1. Discussion of Hypothesis 1: Involvement of technological innovation in value creation process ....................................................................................................................... 46 5.7.2. Discussion of Hypothesis 2: Different types of value are brought by managerial innovation ..................................................................................................................... 47 5.7.3. Discussion of Hypothesis 3: Values resonance and Values dissonance . 47 5.7.4. Discussion of managerial innovation involvement in CSR ......................... 48

5.8. LIMITATIONS OF THE STUDY ................................................................................................ 48

6. CONCLUSION .................................................................................................................... 50 6.1. FINAL CONCLUSION ................................................................................................................ 50 6.2. SUGGESTIONS FOR FURTHER RESEARCH ............................................................................ 50

7. REFERENCES .................................................................................................................... 52

8. APPENDIX ......................................................................................................................... 56

List of figures

Figure 1: IKEA Organization Chart (IKEA 2013e). ............................................... 5 Figure 2: Creation and Measurement of Value generated by Managerial

Innovation through Corporate Social Responsibility. ............................................. 9

Figure 3: Managerial Innovation inspired by Damanpour and Aravind (2011) as

well as Evan (1966). .............................................................................................. 11 Figure 4: CSR inspired from Tilcsik and Marquis (2013), Kytle and Ruggie,

(2005) as well as Porter and Kramer (2006). ........................................................ 12 Figure 5: Process from Managerial Innovation to measure created value inspired

from Balabanis et al. (1998). ................................................................................. 13 Figure 6: Managerial and Technological Innovations inspired from Kraus et al.

(2012). ................................................................................................................... 15

Figure 7: Managerial and Technological Innovations inspired from Chesbrough

(2010). ................................................................................................................... 15 Figure 8: Managerial and Technological Innovations inspired from Damanpour &

Aravind (2011). ..................................................................................................... 16

Figure 9: Managerial and Technological Innovations inspired from Birkinshaw et

al. (2008). .............................................................................................................. 17

Figure 10: Managerial and Technological Innovations inspired from Den Hertog

(2010). ................................................................................................................... 17 Figure 11: Hypothesis 2 on Managerial Innovation process including the notion of

value. ..................................................................................................................... 19 Figure 12: Hypothesis 3 on Managerial Innovation process including the notion of

values and value. ................................................................................................... 20 Figure 13: Definition of Risk (Kytle & Ruggie 2005). ......................................... 21

Figure 14: Organization chart of Karlstad IKEA store ......................................... 31 Figure 15: Bar chart representing the impact of CSR actions on the IKEA

employees. ............................................................................................................. 34 Figure 16: Bar chart representing the impact of CSR actions on the environment.

............................................................................................................................... 35 Figure 17: Bar chart representing the impact of CSR actions on the community. 35 Figure 18: Bar chart representing the values shared by the IKEA employees...... 36

Figure 19: Bar chart representing the impact of CSR actions on the employees

working life. .......................................................................................................... 36

Figure 20: Bar chart representing the impact of CSR actions on the employees’

life outside IKEA. ................................................................................................. 37 Figure 21: Bar chart representing the impact of CSR actions on the productivity

and well-being of IKEA employees. ..................................................................... 37 Figure 22: Analysis of Steve Howard’ employment ............................................. 38

Figure 23: Analysis of the People & Planet Positive Project ................................ 39 Figure 24: Analysis of the Code of Conduct and Trust Line ................................ 41

Figure 25: Analysis of the Iway. ........................................................................... 42 Figure 26: Analysis of Shopkeepers’ implementation. ......................................... 44 Figure 27: Analysis of Samhall collaboration. ...................................................... 45

1

1. INTRODUCTION

1.1. Background

In recent years, a heightened awareness of many companies regarding

environmental issues and the welfare of employees has contributed to their

development as major concerns on a global scale. This evolution indirectly

shows that the production-focused strategies, where costs and prices are

prioritised, are now out of date. Stakeholders recognized that production-

focused strategies do not consider the customers’ values, or social and

environmental aspects (Dawkins & Lewis 2003). Thus, Corporate Social

Responsibility (CSR) strategies have increasingly emerged as a manner to deal

with these concerns.

By definition, a CSR strategy integrates economic, environmental and social

aspects. Therefore, philanthropic actions involved in CSR strategies have

proliferated in order to establish a relation between organizations and their

environment (Garriga & Mele 2004). In addition to bringing value to the

community, the CSR strategies include, for example, recycling, employment of

local people and infrastructural improvements; in which these actions also

enhance both the external and internal image of corporations (Tilcsik &

Marquis 2013).

In parallel to this philanthropy, Human Resources’ role has become more

important in companies’ strategies because the productivity depends on the

motivation and the wellbeing of the employees in the workplace. Moreover,

CSR strategies that include internal social aspects normally involve the HR

department in projects such as the improvement of working conditions or the

integration of people in difficulty in the workplace. Hence Human Resource

managers need to implement some actions in order to increase the motivation

of the workers (Danna & Griffin 1999).

Since the importance of CSR and Human Resources has been rising, new

theories and concepts have also emerged to develop the science of human

resources as well as management practices (Porter & Kramer 2006). New

management practices that constitute a part of innovations in the area of

management are called managerial innovations which aim to develop productivity

through employees’ welfare as well as enhance the internal image of firms

2

(Damanpour & Aravind 2011). Furthermore, these innovations regarding

human resources bring a competitive advantage by implementing new

processes which do not exist in other corporations and are difficult to copy for

the competition. Accordingly, managerial innovations help to increase the

profitability of companies (Damanpour & Aravind 2011).

1.2. Problem identification

In the background, we presented the notion that managerial innovation and

human resources can be connected. Porter and Kramer (2006) actually specify

a link between managerial innovations and Corporate Social Responsibility but

the relation is not well defined. Thus, we identify two problems in relation

with managerial innovation that we discuss throughout this paper.

Damanpour and Aravind (2011) consider the impact of managerial innovation

on the company as hard to measure theoretically since they are qualitative data.

So these results are more difficult to measure than financial benefits for

companies. On the contrary, existing tools are available and used by firms to

measure the impact of CSR on communities and their corporations. However,

we think that the effects of managerial innovations could also be observed in

practice within organizations through employees’ welfare, motivation,

behaviour and other attitudes regarding companies. Thus, this is the first

problem of the research that will be studied by investigating the link between

managerial innovation and CSR to see if it could reveal the impact of

managerial innovation.

Another problem that will be discussed in this thesis is the relation between

managerial innovation and technological innovation. Kraus et al. (2012) thinks

that managerial innovation has to deal with technological innovations.

Technological innovations refer to innovations including a new technology.

These two categories of innovation are related because they bring values to

organizations. However, the nature of this relation is not well established by

scholars. For instance, Kraus et al. (2012) stipulate that managerial innovation

is dependent on technological innovation, while Birkinshaw et al. (2008)

support that technological innovation is not mandatory in order to create

value in the managerial innovation processes. These controversies highlight

the lack of studies focused on the managerial innovation area (Damanpour

and Aravind 2011). Thus, to study the impact of managerial innovation on

3

CSR, its relation with technological innovations will be clarified in the

theoretical framework.

According to the problems stated above, we set up three research questions as

follows:

1. What motivates managerial innovations in CSR actions?

2. In what way does managerial innovation affect CSR actions?

3. What is the impact of managerial innovation on the company and its

stakeholders?

1.3. Motivation of the study

This part will highlight why this thesis is important not only to the business

world, including both companies and employees, but also to students and

researchers.

First of all, as emphasized in the problem discussion, managerial innovation is

an area that has a shortage of studies. For example, Damanpour and Aravind

(2011) only focus on theory, method and process without any application to

practical problems. Other research papers use quantitative analysis trying to

establish general truths about managerial innovations. Hence, it is difficult to

find any paper that gives a concrete illustration of how managerial innovation

works in a company, or articles that deeply study managerial innovation with

CSR. This lack of research constitutes the first reason for our motivation

because, as students in Entrepreneurship and Human Resources, we find this

topic current and valuable for our future careers. Thus we want to deepen the

research in this area with a case study in order to complete the lack of articles

regarding the subject.

As mentioned in the introduction, environmental and social concerns in

companies have recently been of great interest to a large number of people.

Professionals can learn from this paper what benefits they can reap from

managerial innovation and CSR. Being students with several internships

experiences, we know that companies prefer to improve business based on

concrete examples rather than on theories. Managerial innovation linked with

CSR can bring a huge competitive advantage because a company’s internal and

external perceptions, structures and management practices are hard to copy.

4

Therefore, this thesis can be studied in order to understand the importance of

management within an organization with a practical relevance.

In conclusion, management students or those who are interested in managerial

innovation should find this thesis useful since managerial innovation practice

is very important both for a firm's point of view and for employee hindsight.

In addition, managerial innovation is especially crucial for students who will

become employees or managers one day. Broadening knowledge on topics,

which are not presently popular, can illuminate a better vision of internal

changes happening in firms.

1.4. Presentation of the case study

According to the research questions, we would like to focus on four subjects:

managerial innovation, Corporate Social Responsibility, technological

innovation and value. We chose the IKEA group to be the case for our study.

IKEA is specialized in furniture retailing, and has developed a strategy focused

on corporate social responsibility. Thus, IKEA regularly needs to innovate in

this area, with the aim of remaining competitive and keeping a good internal

and external image among stakeholders. By analysing this company, we shall

get a concrete example of managerial innovation implementation in CSR

actions.

1.4.1. General Presentation

The IKEA Group is famous for making interior design and furnishing

accessible to as many people as possible. The company also has established its

popularity with flat-pack furniture by launching the trend of “Do It Yourself”.

Its originality lies in the service offered to its customers. Stores are designed in

a way that allows customers to follow an in-store itinerary leading them to

experience the showrooms inside. Those rooms show them all the IKEA

product lines in everyday life situations. The aim of this concept is to keep

customers as long as possible in the store in order to help them discover all

the solutions that the company offers to make their lives easier. The group has

154 000 employees in 338 stores located in 44 countries through the franchise

system, Inter IKEA Systems B.V. The turnover of the group was 27.5 billion

Euros for the year 2012 (IKEA 2012a).

5

Figure 1: IKEA Organization Chart (IKEA 2013e).

The organization chart presented above introduces the structure of the IKEA

group whose the CEO is Michael Ohlsson (IKEA 2013a). At the top of the

diagram, the Interogo Foundation is the foundation developed by IKEA in

order to help people in the developping world ( IKEA 2013a). This fundation

owns the Inter IKEA holding S.A, which is the parent company of the Inter

IKEA group (IKEA 2013a). The IKEA group is composed of several

divisions, including franchise division, retail centre division, property division

and finance division. The production of IKEA furniture is subcontracted by

Swedwood group to ensure the production capacity of the company

(Swedwoos group 2013). Furthermore, the range department is managed by

another subsidiary, IKEA of Sweden AB. The main objective is to develop

and make the IKEA range available in all IKEA stores (IKEA 2013a). The

division Inter IKEA systems B.V is in charge of managing all the franchises

and auditing all the stores in accordance with the IKEA code of conduct and

values (IKEA 2013b). Vastint Holding BV and Inter IKEA Investment AB

offer management advice to all the franchisees of the brand IKEA (IKEA

2013a).

1.4.2. Vision and Values of IKEA Group

The spirit of IKEA is transmitted through these words: “create a better everyday

life for the many people” (IKEA 2012a). To achieve its vision, the group orients its

sales strategy to offer wide ranges of functional furniture at accessible prices.

The corporate culture is based on the Swedish culture, where IKEA was

founded in 1943 (IKEA 2013c). Thus, IKEA group has developed values

6

relying on simplicity, enthusiasm, humility, sense of challenge, responsibility,

teamwork, coaching and awareness of cost. Each employee forms an

important part of the company’s success. The golden organization values are

trust, integrity and honesty, which go along with the IKEA vision. In order to

ensure that these values are respected, the firm implements different control

means and charts for the protection of its business ethics, environment, and

employees’ well being (IKEA 2012a, 2013d).

1.4.3. Corporate Social Responsibility at IKEA

The CSR is an important aspect in the strategy of IKEA. All the products and

the communication are based on CSR and more particularly on the protection

of the environment. Currently, the IKEA group is working on a new CSR

strategy called People & Planet Positive, which will be explained and analyzed

later on. This new policy in development will help customers have better life

conditions while preserving the environment. It will also ensure that IKEA

will become independent in terms of energy and raw materials. Corporate

Social Responsibility will be extended intensively in the analysis part.

1.5. Thesis objectives

Based on our theoretical framework and the IKEA case analysis, the main

objective is to get more knowledge on CSR and managerial innovations links.

In collaboration with the sustainability coordinator and the Human Resources

department of IKEA Karlstad, we want to verify if technology-based

innovation is always required in order to create value for the firm, or it could

be considered as optional instead. In other words, we would like to see if we

can find examples of managerial innovations without technological

involvement that create value for IKEA.

Moreover, this thesis aims to explore the impacts of managerial innovation

whether it can be applied not only for economic goals, but also for social and

environmental issues, namely Corporate Social Responsibility. Managerial

innovation could bring two different types of values: intangible value, which

could be positive attitudes and trust, towards the company; and tangible value,

such as financial benefits.

When a company implements new managerial innovations in a CSR context, it

should result in an increase of positive external and internal images, and have a

7

repercussion on its economic performance. Several existing indicators to

measure CSR can help evaluating the value created by managerial innovations.

This thesis has the objectives to attest the possibility to measure managerial

innovation indirectly by including another element in its value creation

process.

To conclude, we would like to show that a well-known company has already

been implementing managerial innovation which has an impact on its financial

performance and image.

1.6. Thesis purpose

The purpose of this thesis is to show examples of managerial innovations’

impact on Corporate Social Responsibility. In other terms, it shows how

managerial innovation can be combined with social and environmental actions

to create value for the company in practical relevance. Additionally, this paper

tries to give examples of value that can be brought by the combination of

managerial innovation and CSR.

1.7. Thesis Structure

This thesis is divided into five main chapters beyond this introduction. First,

the theoretical framework will be developed. Second, the methodology used

for the empirical part will be described. Then, the results of the case study will

be presented followed by an analysis of IKEA’ innovations in terms of CSR

and management.

1.7.1. Chapter 2: Theoretical Framework

In the theoretical part, we introduce all the main concepts through Figure 2 to

explain how managerial innovation impacts CSR theoretically as well as how

companies can measure the value brought by these innovations. In the same

chapter, we give definitions about all the concepts involved in the elaboration

of our theoretical framework. Thus, these definitions allow the readers to

acquire a better understanding of the subject. A deeper presentation of

managerial innovation and CSR will conclude this chapter to obtain a better

comprehension about these concepts.

8

1.7.2. Chapter 3: Methodology

In the methodology chapter, we will introduce general theories about research

methods as well as our motivation regarding the choice of a case study design.

Thereafter, the selection of IKEA for this analysis will be developed.

Following the research questions and the limitations of our empirical part, the

method used for the data collection will be described as well as the structure

of the analysis.

1.7.3. Chapter 4: Presentation of the results

In the fourth chapter, we will further develop the CSR and management

aspects of IKEA. We will also provide more information on the IKEA store

of Karlstad. CSR actions including managerial innovations will be explained in

details.

1.7.4. Chapter 5: Analysis and discussion of the case study results

In this chapter, we will analyse the results in order to point out the relation

between managerial innovation and CSR as well as its impact on the company.

Then we will discuss the results of the study in comparison with our

hypotheses from the theoretical framework, and explain the limitations of the

study.

1.7.5. Chapter 6: Conclusion

We will draw a general conclusion of our analysis, and directions for further

research will be suggested.

9

2. THEORETICAL FRAMEWORK

Managerial Innovations, including management, organizational and

administrative innovations, are challenging to evaluate since the value created

is not always measurable in financial terms. Additionally, no tool exists to

measure the value brought by these innovations and no direct economic

results can be seen (Damanpour & Aravind 2011). Thus, the purpose of this

theoretical framework is to establish a system where the impact of managerial

innovation could be assessed. In order to confirm or refute the different

hypothesises stated in the thesis’ objectives, an intermediary had to be

introduced to facilitate the measurement of the value created for the company.

Corporate Social Responsibility, known as CSR, comports most of the time

indicators, which enable an evaluation of CSR actions (McGuire et al. 1986)

and consequently managerial innovations. For this reason, links between

managerial innovations and CSR have also been studied in this part. Figure 2

represents our contribution to the literature on CSR as well as managerial

innovation and the basis for comparison with our analysis from the empirical

part. In this system, managerial innovations are motivated by one or several

stimuli that can be either a CSR strategy or the implementation of a new

technological innovation or other trigger elements. These managerial

innovations can improve CSR which involves human resources and social

concerns. CSR creates different types of values for the firm that can be

evaluated with several indicators. All the elements of Figure 2 are described in

the following parts as well as the construction of the figure.

Figure 2: Creation and Measurement of Value generated by Managerial Innovation through

Corporate Social Responsibility.

10

First of all, definitions will be given to provide the keys to understanding this

diagram. As it is constructed, the schema comports two central elements:

managerial innovation and Corporate Social Responsibility, which will be

defined first. Two other elements also occur upstream and downstream of

managerial innovation and CSR in Figure 2. The first one, on the left,

constitutes the trigger element of managerial innovation and will be explained

right after the definitions of the concepts. The second one, on the right,

represents the impact of managerial innovation on CSR. In others words, it

represents what is created during the process. Last, the different types of value

will be developed.

2.1. Concept of Managerial Innovation

In order to fully understand CSR, managerial innovation is central in our

theoretical framework of the thesis. Consequently, definitions, processes and

examples will be detailed in the following part. The term of managerial

innovation was mainly used in the previous theories; however the literature

specifies two types of innovation in term of management: management

innovation and managerial innovation. The first step is to find out to what

these two concepts refer, and if there are any similarities or differences in their

effects and processes.

2.1.1. Definition of Management Innovation

According to Birkinshaw et al. (2008, p.825), “management innovation is the

generation and implementation of a management practice, process, structure, or technique that

is new to the state of the art and is intended to further organizational goals”. In other

words, this definition states the implementation of new processes, which

represent an organizational change for the corporation. Thus, innovation will

focus on systems and procedures rooted in the company and dealing with

production and employees (Birkinshaw et al. 2008). New procedures can be

implemented to improve not only supply-chain and production quality but

also quality of employee training. Through organizational innovations, the

company searches to remain competitive in the market. As explained earlier,

management innovation is motivated by a stimulus that can be of a

technological, social, environmental, organizational and financial nature. It

constitutes the starting point of the implementation process.

2.1.2. Definition of Managerial Innovation

In regard to managerial innovation, the definition given by Damanpour and

11

Aravind (2011, p.424) appears to be the most relevant. According to them,

managerial innovation is “the implementation of new organizational structures,

administrative systems, management practices, processes, and techniques that could create

value for the organization”. In fact, the term “managerial innovation” gathers

three types of innovation. As presented before, management innovation

constitutes one of them. In addition to the change in practices, processes and

structure management, Damanpour and Aravind (2011) add another element

by defining management innovation as the change of how managers operate.

In other words, these innovations focus primarily on the way managers take

their decisions. The second type of innovation is composed of organizational

innovations, which were shaped by scholars to separate innovation in terms of

management and organizational structures from technological innovations.

The last category represents administrative innovations. They have to be

differentiated from product innovations and technological innovations.

Administrative innovations are completely oriented towards the development

of business efficiency through processes and administrative systems of the

company. For example, administrative innovations include changes in

information systems or human resources. Evan (1966, p.51) explains

administrative innovation as “an idea for a new policy pertaining to the recruitment of

personnel, the allocation of resources, the structuring of tasks, of authority, of rewards”. The

definition of managerial innovation can be summed up as follows:

Figure 3: Managerial Innovation inspired by Damanpour and Aravind (2011) as well as

Evan (1966).

2.1.3. Links between Managerial Innovation and Management Innovation

The literature enables a link to be created between management and

managerial innovation processes. In their article, Damanpour and Aravind

12

(2011) also incorporate the process of Birkinshaw et al. (2008) for the

generation phase of managerial innovation process but with the addition of

one diffusion stage. Thus through these articles, it was concluded that

managerial innovation and management innovation have the same objective:

to answer an organizational, administrative and managerial need. Furthermore,

the article of Damanpour and Aravind (2011) establishes that management

innovation is in fact a part of managerial innovation alongside organizational

and administrative innovation.

2.2. Concept of Corporate Social Responsibility (CSR)

Like managerial innovation, the concept of CSR is central in our thesis. We

have dealt with the impacting concept before presenting the literature and

view on CSR. To demonstrate that managerial innovation can increase the

human and financial capitals of an organization, CSR can be used as an

intermediary, which can serve as both stimulus and results for managerial

innovation actions.

2.2.1. Definition of CSR

Corporate Social Responsibility (CSR) is a recent concept where companies

integrate the triple bottom line: social, environmental and economic concerns,

in their strategy (Enquist 2012). The aim of this model is to establish stability

for the long term and at the same time to lower the impact on the

environment as well as to answer the needs of society. By the means of CSR

actions, companies increase their institutional and internal image as well as

their profitability. Through different articles, three types of CSR’ approaches

have been identified by scholars represented in the following diagram.

Figure 4: CSR inspired from Tilcsik and Marquis (2013), Kytle and Ruggie, (2005) as well as

Porter and Kramer (2006).

13

2.2.2. Links between CSR and Managerial Innovation

CSR can be considered as a stimulus for managerial innovation but more

importantly as a result. All the actions that have to be put in place to increase

CSR have a direct link with managerial innovation. Indeed, firms have to

change their organization; their administrative system or their management

process related to the CSR actions they want to develop. As mentioned

previously with Damanpour and Aravind (2011), these three changes compose

managerial innovation in its entirety. Even if a managerial innovation will

occur with a stimulus other than CSR, these changes will impact CSR as

managerial innovation is related to social concerns. For example, when a

company takes the decision to change its human resources policy through

administrative innovation, it will influence not only employees but also CSR as

it aims to improve the well being of its workers or its stakeholders. Social

management indicators such as absenteeism, job rotation and productivity rate

are used to measure welfare at the workplace. Following these actions, the

company can develop its human capital and its economic performance

(Edvinsson & Malone 1997). As a conclusion, Balabanis et al. (1998) show

that different social and financial indicators can help to measure CSR. For

companies, knowing the impact of their actions is crucial because generally a

lot of funds are invested: therefore, creation of value is required.

Figure 5: Process from Managerial Innovation to measure created value inspired from

Balabanis et al. (1998).

2.2.3. Indicators to measure the value created by CSR

CSR actions can be evaluated with several indicators, which create awareness

among companies about their real impacts on the community and about their

economy (McGuire et al. 1986). The most current indicators are: expert

evaluation, annual rapport and other business documents as well as air and

water pollution. Nevertheless, to evaluate their actions, companies most often

use business documents such as sales rate, results and evolution from the

accounting balance compared to previous years. These indicators permit

companies to recognize and to measure the value brought by CSR actions

14

(Balabanis et al. 1998). Thus, new strategies can be oriented according to the

results of the new actions. For example, when a company has an

environmentally friendly production process and elaborate environmental

charts, the firm can communicate these assets to improve its image. This

action can then be measured not only by conducting surveys on customers but

also by analysing sales. By communicating their environmental values,

companies will attract new customers sharing the same values and thereby

increase consumption.

2.3. Determination of Technological Innovation as a trigger element for Managerial Innovation

As established in the first part, the perspectives of scholars and the data of

Figure 3 fix the definition of managerial innovations as being new

organizational structures, administrative systems, management practices,

processes, and techniques that could create value for the organization

(Damanpour & Aravind 2011). Managerial innovation or management

innovation can be represented by the following concepts well known to

professionals: just-in-time production, quality circles, and cost accounting as

well as 360 degree feedback or total quality management.

This explanation provides an outline of business techniques that can be

considered as managerial innovation. However, when it comes to innovation

in a corporate environment, the literature stipulates an important issue omitted

in the previous definition. As a matter of fact, different categories of

innovation involved in the creation of value have to be distinguished:

innovations based on technological progress, which are designated as

technological innovations and innovations related to pure management, called

managerial innovations. Even if these two classifications are different, Kraus et al.

(2012), Chesbrough (2010), Teece (2010), and Damanpour and Aravind (2011)

are unanimous on the fact that technological and managerial innovations are

connected even if they disagree on the nature of this link. These contradictions

clearly show a lack of studies in the managerial innovation area. Therefore, as a

key element to understanding the process and methods of managerial

innovation, it was essential to study the relation between technological and

managerial innovations. Within this context, numerous points of view from

scholars have been analysed and represented in the following diagrams to

make them more meaningful for readers.

15

2.3.1. Technological Innovation is a key component of Managerial Innovation

In order to create value for the company, some researchers such as Kraus et al.

(2012) support the necessity of technological innovations in the management

innovation processes. Without any technical progress, managerial innovations

may not lead to value. According to these authors, the combination of the two

is indispensable to obtain a maximum outcome for the firm. Their theory is

based on authors like Chesbrough (2010) and Teece (2010), which have also

been studied in this theoretical framework.

Figure 6: Managerial and Technological Innovations inspired from Kraus et al. (2012).

2.3.2. Technological Innovation requires Managerial Innovation to create value

Contradictions appear in the comparison between the analysis made by Kraus

et al. (2012) and other papers quoted as references. For Chesbrough (2010),

technological innovations motivate managerial innovation but they do not

constitute a relationship of reciprocity. In other words, when companies

innovate in terms of product or services, they need new structures,

management or processes to obtain an optimal profit from the technological

innovation. Conversely, it does not mean that a new structure requires

technology to create value. Teece (2010) reinforces this idea by affirming that

technological progress is lionized in most of present societies explaining why

the value of management innovation could be underrated. Thus, the value

perceived by technological innovations is higher than those by managerial

innovations, but the author considers these are of equal, if not greater

importance. These theories do not claim directly that managerial innovation

can bring value independently from technology, but at least offer different

lines of thinking to reflect on the relation between the two categories.

Figure 7: Managerial and Technological Innovations inspired from Chesbrough (2010).

16

2.3.3. Reflection on the positioning of Technological Innovation and Managerial Innovation

This opposition of thought between authors’ leads us to question the real link

of the two concepts. The conclusion after reading articles was that, perhaps,

the model applied may differ in function of the situation. In certain companies

or cases, Kraus et al.’ (2012) thoughts would be applicable, while in others

Chesbrough (2010) would be more relevant. However, one dimension is not

envisaged in the previous theories. A new point of view raising questions is

brought by Damanpour and Aravind (2011). After studying managerial

innovation, these two researchers cannot affirm in which order the elements

occur. Nonetheless, they reflect on the dynamics of managerial and

technological innovation by proposing three options: whether managerial

innovations lag, are complementary to, or lead to technological innovations

(Damanpour & Aravind 2011).

Figure 8: Managerial and Technological Innovations inspired from Damanpour & Aravind

(2011).

2.3.4. Technological Innovation as a trigger element of Managerial Innovation

The unclear link between the concepts has helped create another hypothesis in

the literature, which completely changes from the points of view exposed

above. In all the previous theories, even if they do not agree on the process to

create value, authors have one element in common: both technological

innovations and managerial innovations are included in the process. However,

a different way of thinking is introduced by scholars in the managerial

innovation area. They consider that technological innovation is foremost a

trigger element before other stimuli. Thus, the first stage of managerial

innovation is a motivation inside the firm, which can be not only technological

as seen in the previous theories but also factorial or conditional within the

company (Birkinshaw et al. 2008). For instance, the willingness of top

management to orient its organization to a CSR strategy can constitute a

stimulus that will motivate managerial innovation within the firm. Accordingly,

17

the supply chain could be modified to integrate recycling in the process.

Recycling could bring value to the company by improving its image among

customers and employees. This example can be taken as a possibility that

technological innovations are not necessarily involved in management

innovation processes.

Figure 9: Managerial and Technological Innovations inspired from Birkinshaw et al. (2008).

2.3.5. Reflection from Service Innovation literature

Another clue that confirms this hypothesis can be found in the literature from

other types of innovation. The four-dimensional model of service innovation,

designed by Den Hertog (2010), which is shown in the Appendix 1, allows us

to make certain affirmations. The first three dimensions quoted in the model

new service concept, new client interface and new service delivery systems are

similar to managerial innovation. Furthermore, technological innovation,

called technological options in Hertogs diagram, is considered as entirely

optional as a way to bring value to both customers and employees.

Accordingly, if methods and techniques from managerial innovation in other

areas are used to bring value without technology, it means that new

organizational structures, management practises, processes and techniques can

bring value independently.

Figure 10: Managerial and Technological Innovations inspired from Den Hertog (2010).

18

2.3.6. Hypothesis 1: selection of the model

After evaluating different perspectives on the relation between managerial and

technological innovation, the model from Birkinshaw et al. (2008), Figure 9

will be used as a basis for the following hypotheses. The motivation for this

choice comes from the fact that their point of view gathers most of the

theories mentioned. Indeed, Chesbrough’ (2010) theory presented in Figure 7,

can be found in the selected model, Figure 9. If technological motivation

constitutes the stimuli, it will generate managerial innovations inside the

company. The questioning from Figure 8 can be interpreted as follows: if they

do not know where managerial innovation is situated compared to

technological innovation, it is perhaps because managerial innovation can

operate alone. Finally, figure 10 is reflected in the optional nature of

technological innovation in Figure 9.

2.4. The value concept: result of managerial innovation on CSR

Previously several diagrams were introduced in order to understand the

creation of value depending on managerial innovation. However value is a

broad concept, which has to be incorporated in this theoretical framework in

order to define the term’s value and explain its functioning. The next part will

focus more on the value generated for the company than for its customers.

2.4.1. Hypothesis 2: Tangible Value and Intangible Value

The literature mainly stipulates definitions regarding value for customers but

provides little on what value really is for an organization. “The value of a resource

enables to answer customer needs in the aim to be better satisfying or enables a firm to satisfy

needs at lower costs than competitors.” (Bowman & Ambrosini 2000, p.2) The

resources quoted in the definition are methods or techniques of managerial

innovation which on the one hand will certainly better satisfy the customers

and which on the other hand, will not necessarily satisfy the company’s needs

at a lower cost. In fact one element omitted in this definition is the non-

financial aspect of the value for the company. This missing element is covered

by Grönroos (2012, p.303): “Sometimes the value that has been created can be measured

in financial terms, for example through effects on revenues or wealth gained or through cost

saving, but value always has an attitudinal component, such as trust, affection, comfort and

easiness of use”. If this attitudinal component increases the trust or affection of

customers for a brand or a company, then it can also improve the

19

corporation’s image among other things. In this thesis, two types of value will

be differentiated: value measured in financial terms will be called financial,

value as a tangible value, and value related to attitudinal components will be

referenced to as intangible value. The first hypothesis then becomes as

presented in Figure 11 below: managerial innovation is encouraged by various

stimuli resulting in intangible and/or tangible value.

Figure 11: Hypothesis 2 on Managerial Innovation process including the notion of value.

2.4.2. Hypothesis 3: Values may drive value

The notion of value is however slightly more complex as it also involves the

concept of values. Value can be interpreted as a benefit in its general meaning

whereas values refer to standards, ideals, principles and ethics by which

companies live (Waddock & Bodwell 2007). For example, company values

could be: no waste, simplicity, responsibility, cost consciousness etc.

According to Enquist (2012) values drive value, which means that customers

and organizations perceive value not only from economic perspectives but

also from values. Thus, one concept envelops these theories: values

resonance/dissonance. Values resonance transpires when corporations share

the same values with all its stakeholders and the community, including:

employees, customers, local community, suppliers and global society. In an

opposing manner, values dissonance occurs when there are contradictions

between corporate values and stakeholders or community values. For instance,

if a company has “no waste” as one of its values and is implemented in a

country where the ecological aspect is truly important for the citizens, it can be

said that there is a value resonance. On the contrary, if a company in the same

country does not have any ecological values as corporate values, then the

concept of values dissonance can be seen. This concept brings another

element to the second hypothesis.

20

Figure 12: Hypothesis 3 on Managerial Innovation process including the notion of values and

value.

2.5. Composition of Corporate Social Responsibility

Even if corporate philanthropy, risk management and creating shared value are

three categories of CSR, they are actually very different in their purpose,

impact, benefits and value brought to the company.

2.5.1. Corporate Philanthropy

Corporate philanthropy towards non-profit organizations and the society

(Tilcsik & Marquis 2013) aims to provide funds and diverse skills through the

community’s activities. These actions are considered as a short-term strategy

and have an operational impact on companies. Benefits obtainable through

corporate philanthropy are limited because most of the time, the budget

allocated is small. Furthermore, these short-term operations have a limited

financial or institutional impact.

2.5.2. Risk Management

Risk management is directed toward social, political, technical and economical

risks (Kytle & Ruggie 2005). Objectives in managing the risks are obviously to

restrict risks and operational impacts on organizations while simultaneously

managing external relations that may pose a threat. Risk is defined as a lack of

controlling and measuring in comparison to environmental threats and

company weaknesses, Figure 12.

21

Figure 13: Definition of Risk (Kytle & Ruggie 2005).

The company should implement a detection system, which controls and

measures damages, loses and disruptions on the business market. Moreover,

this system allows the reduction of the impacts of external elements on the

firm’s economy and image. According to the think tank of the Kennedy

School of Government (Kytle & Ruggie 2005), CSR actions relative to risks

are varied and do not only influence philanthropy. They also affect relations

with stakeholders at the workplace, production, supply chain and the

community.

2.5.3. Creating Shared Value (CSV)

The creation of shared value means that value acquired by companies and

social welfare is interdependent (Porter & Kramer 2006). By social welfare,

Porter and Kramer (2006) take into consideration not only employees but also

available resources as well as the community. To create shared value includes

three divisions: reconceiving products and markets, redefining productivity in

the value chain, and enabling local cluster development. By reconceiving

products and markets, companies create their products with the intention of

better answering social needs such as recycling, lowering pollution, and

protecting rare resources. Redefining productivity in the value chain allows the

evaluation of a company’s production, product quality, costs and consumed

resources. Thus, control over rare resources, as well as social and economical

development, increases. Enabling local cluster development helps other

organizations in their economic growth and thus bring value to organizations.

In other words, a corporation needs infrastructures such as functioning roads

and telecoms etc. to develop its business and acquire value. The first aim of

the CSV is to allow companies to be profitable while respecting both social

and, environmental objectives and creating a competitive advantage with CSR

actions (Porter & Kramer 2006)

22

3. RESEARCH METHODOLOGY

3.1. General knowledge about research methods

When it comes to research methods for the empirical study, Bryman and Bell

(2011) suggest that different options have to be distinguished among the

theories. Investigations can be quantitative, qualitative or both. Qualitative

researches use techniques, such as individual interviews or questionnaires to

collect data. Quantitative studies aim to find general truths about certain topic

using statistics and numbers, whereas qualitative studies tend to observe and

to describe a situation (Bryman & Bell 2011). Eisenhardt (1989) suggests that

combining these two methods in some cases can render a better analysis about

a particular situation and set of data. This combination allows researchers,

firstly, to have a general knowledge of a sample with quantitative methods, and

then focus on the subjects with qualitative techniques. However, this

combination is not always the best method because it depends on the nature

of the study’s subject and research questions (Eisenhardt 1989).

Another important differentiation is the dissimilarity between exploratory

research and descriptive research. Exploratory research enables insights into

formulated problems in order to generate new products ideas, establishes

priorities for further researches and clarifies concepts. In other words, it aims

to understand the problem itself through literature searches, experience

surveys, focus groups and case study analyses. On the other hand, descriptive

researches try to establish characteristics for a certain population by asking

what, when and how often. Descriptive research utilizes methods such as the

panel data and longitudinal and cross-sectional studies (Murthy & Bhojanna

2009). Exploratory research can be associated with qualitative methods

whereas descriptive research can be connected with quantitative methods.

Our three research questions intend to address the process in which

managerial innovation is impacting CSR. The process necessitates getting

sufficient knowledge about CSR actions from people who are actually

involved. To obtain clear explanations of the concepts, we chose to mainly

conduct a qualitative research. However, we decided to combine our

qualitative study with a quantitative one to establish statistics on the impact of

managerial innovation on CSR within IKEA. Understanding a process in

practical relevance requires insights into a company. This insight is particularly

23

provided by an exploratory design through a case study analysis that combine

qualitative and quantitative methods.

3.2. Data collection

3.2.1. Literature review

Initially, it is essential to widen our knowledge about the research field with

the aim of building a relevant basis for the theoretical framework. Reading

pertinent articles, research papers and book chapters from online databases

such as Google Scholar, Emerald, Business Source Premier and Scopus,

allowed us to collect a large quantity of information. For this research, the

main keywords were innovation, managerial innovation, technological

innovation, value, values, CSR and retailing. Due to the large amount of

articles related to our research subject, a selection of the best articles covering

the topic was made. In order to be more efficient, we shared the collection

and reading. Then through brainstorming, we developed a global vision on the

literature related to our main topics. With an acquired knowledge of all the

theories, the writing process of the theoretical framework started by linking all

the concepts.

3.2.2. Qualitative data

Methods from qualitative research have been used to collect the data from

IKEA. Magnus Engstrand, the Local IT and Sustainability Coordinator at

IKEA Karlstad, provided us with the information presented in the following

empirical part.

The first step of the primary data collection was sending a questionnaire to

Magnus Engstrand via email (see Appendix 2). From this we received the first

indication of the approach of managerial innovation and CSR at IKEA. Even

though the results provided interesting avenues for the thesis, much

information was missing. Therefore, a second questionnaire (see Appendix 3)

was sent to him in order to prepare for a face-to-face interview.

The interview occurred on April 2nd 2013 at the IKEA Karlstad store. During

the interview, questions regarding the process of CSR actions, the motivation

and results, involvement of managerial innovation, employees and customer

perception were addressed to Mr. Engstrand. The interview followed an

unstructured interview guide and allowed us to deepen our knowledge of

24

concepts that were relevant for our thesis. Mr. Engstrand gave us more details

on Planet & People Positive, the shopkeepers project, the Iway, Samhall and

the Code of conduct. During this meeting, we also collected paper documents,

such as the code of conduct, which are guidelines for the behaviour of each

worker; the Iway include guidelines for providers; and a booklet on VOICE, a

survey conducted among employees every semester.

This encounter also led to a connection with the Human Resources

Department intermediated by Mr. Engstrand. He continued working with us

by providing the documents about managerial innovations recently

implemented.

Finally, the last questionnaire (Appendix 4), targeting employees with different

diversities at IKEA, was distributed to generate more information about their

perception and the impact of managerial innovations on them. Twenty

questionnaires were returned and analysed.

3.2.3. Quantitative data

The quantitative questionnaire (Appendix 5) was built on the answers from the

qualitative questionnaire and was directed to IKEA employees to get their

perception of managerial innovation impact through CSR. With this

quantitative aspect of our case study, we would like to verify if our results

from the qualitative questionnaire could be generalized to the whole store. In

order too measure the impact of the new concepts on the employees,

environment and the community; scaled questions were used. The

questionnaire was sent to 78 employees on June 24th and 67 answers were

received on July 13th indicating a response rate of 85,90%. It was distributed

through our contact Mr. Engstrand via email. Answers were analysed with

Sphinx, an online software for the distribution of questionnaires and

processing of statistical data.

3.3. Motivation of the case study design

The aim of this thesis is not to provide processes that can be considered as

exclusive on what is happening in every company. On the contrary, our

approach is more observational as an attempt to collect more information on

CSR and Managerial Innovation links. A quantitative or qualitative research

method conducted separately would not help to understand profoundly the

25

models presented in the theoretical framework because it involves having an

inside view of an organization and its different business departments. We

needed to examine the motivations and consequences of certain changes and

the evolution over time rather than just to see a picture of a firm at a given

moment. Consequently, the combination of both qualitative and quantitative

studies was more relevant in relation to our objectives motivating the choice

of a case study design. An intensive analysis of a single case aims to provide an

in-depth elucidation of it (Bryman & Bell 2011). This case study represents an

opportunity to learn more about the topics mentioned in this thesis and find

out details omitted in the literature. As in many other research projects, our

case is based on a single organization: the IKEA store located in Karlstad -

Sweden.

3.4. Why IKEA?

The retailing sector was chosen for this thesis since it constitutes a wide area

for CSR actions. Zahra et al. (2000) found a positive relation between the size

of a company and managerial innovations. In other terms, a large company has

more recourse to managerial innovations than a small or medium corporation.

World’s Most Innovative Companies Ranking (Forbes 2013) supports this

theory. If we look at the top 20 list of Innovative Companies, many big

international firms can be found, such as Amazon.com, Apple, Google and

Nintendo. For our case, we needed a large company from the retailing sector

to combine both managerial innovation and Corporate Social Responsibility

aspects. IKEA represented an ideal company to study in our area as it has

shown a large degree of consideration for CSR through corporate values in its

code of conduct: works towards sustainability, does not tolerate harassment,

avoids conflicts of interest, and fights corruption (IKEA 2012a). Moreover,

with 338 stores in 44 countries around the world and 154 000 co-workers in

different functions, IKEA has a clear notion of managerial issues including

managerial innovations (IKEA 2012b)

3.5. Research Questions and Limitations

With this case study, we want to find concrete examples of managerial

innovations that lead or take part in CSR actions. To match our hypotheses

and theoretical framework, we excluded CSR activities that were not linked to

26

managerial innovations. Through the data collection presented below, we tried

to explore each project that was interesting for our research to find out why

these innovations were established, how they were implemented, in which

way(s) they are connected to CSR, and what are the results for the company or

stakeholders. In this analysis, we intend to answer these questions, as they

constitute the red thread of this empirical part.

3.6. Discussion of validity and reliability in our thesis

The validity of a case study design is often referred to as subjective because

information can be provided by a single source or can be misinterpreted by

investigators (Riege 2003). According to Yin (1994), three principles have to

be followed to overcome the subjectivity of a case study design: 1) use

multiple sources of evidence, 2) create a case study database, and 3) maintain a

chain of evidence. Thus, the data were collected not only from our contact,

but also from the employees who work in the Human Resources Department

and the Sustainability Department. The corporate website of IKEA and

business documents were also used to verify the data. Using multiple sources

of evidence brings a better objectivity to a research as it permits the

comparison of different points of view (Riege 2003). A case study database

was also created to gather all the documents and the information that was

collected for both empirical and theoretical parts. This enabled us to

objectively base our discussion and analyze the evidence. During the writing

process, we tried to maintain a chain of evidence since we intended to create

the links between theories and data that follow our research questions and the

evidence from the case study.

27

4. PRESENTATION OF THE RESULTS

4.1. Current Indicators to measure CSR at IKEA

To control the impact of its CSR actions on employees and customers, IKEA

uses various surveys. The first one, named VOICE and oriented to employees,

measures the satisfaction of the staff at the workplace. An external company

TNS Sifo conducts the VOICE survey twice a year1. The questions are related

to the feelings and well-being at the workplace as well as to CSR in order to

collect employees’ opinion about on-going projects and be aware of the

impact on them. Besides CSR and communication actions, another survey is

used in targeting customers. An in-store survey conducted by employees helps

IKEA to evaluate its impact on customers with questions on several topics

including CSR.

4.2. Innovation at IKEA

Currently, the IKEA group orients its strategy of innovation towards

technological innovation. Therefore the company strives to improve its

productivity through technological innovations and at the same time continues

to educate its employees to make sure that IKEAs values and its CSR strategy

are respected. Theoretically managerial innovations are the least developed,

but the main actions such as the code of conduct and “People & Planet

Positive” developed in the following analysis include several managerial

improvements. Even if technological innovations are part of these CSR

actions, they also concern and affect the communication, corporate culture

and other management aspects which cannot be neglected.

4.3. Focus on the IKEA store in Karlstad, Sweden

In the analysis part, most of the CSR actions will be detailed according to the

IKEA Karlstad store’s point of view. The Karlstad store opened in August

2007 and has a size of 26.000 m2 which welcomed 1 300 000 visitors in 2012.

This site has 214 employees of which 75% are female and 25% male2. Like

1 Magnus Engstrand Local IT and sustainability coordinator, survey on the 19

th March 2013

2 Magnus Engstrand Local IT and sustainability coordinator, email on the 16

th April 2013

28

every IKEA store, IKEA Karlstad implements different CSR actions shaped

by the parent company to help its community. For example, in a link with

IKEA foundation, the store organizes events to help homeless persons or

drug’ addicts. Furthermore, in an environmental concern the store works in

collaboration with the company O2, which is specialized in wind power

production in Nordic countries. Due to this partnership, the store is now

energy independent.

4.4. Presentation of CSR actions including managerial innovations at IKEA

4.4.1. Nomination of Steve Howard as Chief Sustainability Officer and People & Planet Positive Project (PPP)

Steve Howard was appointed new Chief Sustainability Officer of the IKEA

Group and started his assignment in January 2011 (IKEA 2013a). Before,

Steve Howard was the Chief Executive Officer and the founder of the Climate

Group, a non-profit organization working for a low carbon future through

inspiring and catalysing leadership (The Climate Group 2013). This

hierarchical title was created for him to launch IKEA into a new sustainability

strategy. Even though IKEA is a big company and by nature a sustainable

company, it saw itself as failing to communicate its values and actions to the

public.

The company’s previous initiative Never Ending List, NEL, which was

launched before Steve Howard’ recruitment, provided guidelines to respect the

environment. However, this initiative was not oriented on actions, thus

limiting its impact and communication. Consequently, Steve Howard was

approached to make a change in IKEA strategy regarding sustainability3.

“When I met with Ikea's CEO Mikael Ohlsson, I said: "If you're interested in being

incrementally less bad, I'm the wrong guy. If you're interested in transformational, I'm in."

Mikael's face lit up.” (GreenBiz 2013)

Steve Howard has the project to implement a new CSR strategy named People

& Planet Positive, which is composed of three main objectives. The first

objective is to create a sustainable everyday life for IKEA customers.

Accordingly IKEA created products, which use technological innovations in

their production to consume less energy and sell them at affordable prices.

3 Magnus Engstrand local IT and sustainability coordinator, survey on the 19

th March 2013

29

The second objective is to become independent in terms of energy and

resources on a global scale. IKEA is conserving the environment by limiting

its waste and use its resources in an optimal way. The last objective is to create

a better life for the community. IKEA aims to improve the life of its co-

workers, employees as well as its providers (IKEA 2012c). Thus IKEA

planned quantitative goals that are spread over several years4.

By the end of 2013 all IKEA suppliers for home interior products will respect

the IWAY Chart. IWAY is the code of conduct reserved for suppliers and

which allows protecting the environment and the working conditions of co-

workers. Conditions and effects of the IWAY will be clarified later on.

By 2015, IKEA has the objective to produce its entire cotton products line in

accordance with “The Better Cotton” initiative. This certification promotes

and improves social and environmental impact of the cotton-farming sector.

By 2017, IKEA’s goal is to obtain at least 50 % FSC certified wood in its

products. The certification Forest Stewardship Council ensures to collect

wood from sustainable forests (FSC 2013). This certification is delivered by

an organization with the same name. Forest Stewardship Council has three

principal missions: respect of the environment by protecting the forest

biodiversity, social responsibility by involving communities and companies in

forest management, and make a sustainable economy from the forest

resources. To obtain this certification, IKEA needs to respect ten criteria as

well as the defence of forests with high conservation value, low environmental

impact or rights of indigenous peoples.

By 2017, IKEA will sell and use only LED lighting in their stores. LED

lighting is more respectful of the environment and saves energy.

Finally, by 2020, the amount of energy that the stores consume will be

generated by IKEAs renewable energy production. Presently in Sweden, the

group produces renewable energy from wind power plants to cover the usage

of the Swedish stores.

4.4.2. Universal Code of Conduct

The universal code of conduct is one of the latest managerial innovations

implemented on a global scale. As IKEA keeps moving into new businesses

and developing its supply chain, it is crucial for the organization to introduce a

4 Magnus Engstrand local IT and sustainability coordinator, survey on the 19

th March 2013

30

code of conduct to guide employees in their actions as well as in the way to do

business. This booklet distributed to every worker is rooted in the culture and

shared values of IKEA. The code of conduct constitutes a basis for all

behaviour and helps IKEA to conduct business in a fair way all around the

world. Stakeholders share high expectations of the firm to perform business in

an open, honest and ethical way (IKEA 2012a). The code of conduct provides

guidelines on how workers should act, how they should work together, and

how the company handle external relations.

In addition to improving the internal and external images of the company, the

code of conduct aims to increase employee welfare as it includes regulations

on harassment, alcohol, drugs, and the respect of privacy. Moreover, the code

of conduct supports equal opportunities, which means that IKEA fights for

human rights and against discrimination. It also tries to inculcate the value of

sustainability for workers at every level of the hierarchy.

Alongside this innovation, the group has implemented the IKEA trust line at

an international scale too5. This project is a listening centre reachable by mail,

e-mail, online and telephone. The trust line is opened all the time, is free and

can handle employees concerns in their local languages. The purpose of this

centre is to give a voice to stakeholders if they have any concern regarding the

code of conduct or want to report behaviours that do not comply with the

latter.

4.4.3. IWAY

IWAY is the code of ethics created by IKEA Supply AG and is directed to

IKEA’s providers. This code aims to diffuse the corporate values to every

business partner. According to People and Planet Positive objectives, all the

providers in home interior products will have to respect the IWAY6. Besides

extending company values to suppliers, the purpose of the IWAY is to ensure

that social and environmental issues are respected through three guidelines:

What is in the best interest of children? What is in the best interest of the

worker? What is in the best interest of the environment? (IKEA 2008)

With this document, IKEA shows its recognition for the Universal Human

Rights and at the same time complies with the trade boycotts and embargos

decided by the United Nations (IKEA 2008). Another goal of this charter is to

decrease the corruption of companies in certain countries.

5 Magnus Engstrand local IT and sustainability coordinator, survey on the 19

th March 2013

6 Magnus Engstrand local IT and sustainability coordinator, survey on the 19

th March 2013

31

The IWAY defines suppliers as “any company, corporation or individual supplying

and/or delivering products, components, materials or services to the IKEA Group of

companies” (IKEA 2008). Thus, all entities mentioned in the previous definition

must respect the rules of IKEA if they want to establish a business

collaboration. Rules set in the IWAY concern for example the air quality,

noise, water and ground quality, chemicals products used, waste as well as

prohibition of child and forced labour (IKEA 2008). It also indirectly provides

the workers with guidelines regarding fire prevention, health, security at the

workplace, housing facilities, work and social laws, and struggle against

discrimination and harassment.

4.4.4. Shopkeepers

New managers called Shopkeepers were introduced in 2010 as a global setup.

The role of a shopkeeper can be identified as a department manager. They are

in charge of a specific department or area of an IKEA store. This department

is considered as their own little shop (Thomasdóttir 2011). For example at

IKEA Karlstad, there is one shopkeeper responsible for the living-room area,

one for the textiles department, one for lightning and so on as we can observe

in Figure 22. This new low-level manager position includes the same

responsibilities as a sales manager. They are in charge of the daily operations

supervision as well as managing the sales workforce of their department.

Figure 14: Organization chart of Karlstad IKEA store

7

7 Magnus Engstrand local IT and sustainability coordinator, email on the 22

th April 2013

32

At IKEA Karlstad, there were five managers in sales, which disappeared to

introduce ten shopkeepers. The purpose of this change was as the code of

conduct, work in the same way with leadership in sales worldwide and

increasing the number of managers to get a more present leadership in store.

The aim was also to have a greater focus and ownership from the shopkeeper

in their area of responsibility as well as to enhance and deepen skills,

responsibility and commitment8.

4.4.5. Samhall

The Karlstad IKEA store works in collaboration with Samhall, an organization

owned by the Swedish state. Samhall is specialized in the integration of

persons having trouble to enter the workplace (Samhall 2013). It includes:

people physically and mentally disabled and individuals having social

problems. Many IKEA stores collaborate with Samhall and also with

companies like Conexi in order to help people with autism and Asperger

syndrome to find jobs and allowing them to participate in the workplace9. The

goal of Samhall is to provide services and goods to companies while

developing the employment of people with disabilities. Samhall also provides

employees and specialized managers to take care of these workers (Samhall

2013). IKEA stores regularly employs people from Samhall, which has its own

office and managers inside the shop. Samhall employees have a supporting

role regarding customer services and sales with missions such as cleaning,

ensuring the availability of “shopping tools”, helping customers in picking

orders etc.

4.5. Interpretation of the answers from the qualitative questionnaire

Regarding the employment of Steve Howard, the answers to our questionnaire

are divided. Several employees did not answer our questions and some did not

know who Steve Howard is. For others, when they learned his background,

they found he was the right person to hire and liked the clear, new strategy. In

fact, the creation of a new hierarchical position appointed as organizational

innovation did not change the feelings workers have for IKEA. As they said, it

did not change their view on the company. In addition, some respondents

expressed good attitude towards the project People & Planet Positive.

8 Magnus Engstrand local IT and sustainability coordinator, survey on the 19

th March 2013 and the

2th

April 2013 9 Magnus Engstrand Local IT and sustainability coordinator, email on the 23

rd April 2013

33

Opinions further diverge on the impact of PPP regarding our questionnaires.

Nevertheless, benefits brought to a majority of workers are more valuable than

in others concepts mentioned in our thesis. For example, education of

managers and workers in general, helped to explain to customers in what ways

IKEA could help them. A PPP slide presentation encouraged a lot of

employees to change their light bulbs to LEDs and now they even recommend

them to friends and customers. Some also said that PPP helped them make

better choices at home regarding environmental issues. Additionally, even

though a good clear strategy on how to move forward was really appreciated

by individuals, they also would like IKEA to show more of what they do. For

example, more communication on charity with soft toys selling would be

appreciated. To sum up, even if some people think PPP did not change

anything in their life, as they are already environmental friendly, it had an

important impact on two points. Firstly, it enhances the communication

between customers and employees on environmental issues, and thus it also

enhanced service quality. Secondly, it improves the quality of life for certain

workers at both the workplace and at home.

Among employees, the attitudes are mostly positive toward the IKEA Code of

Conduct. Relying on answers to our questionnaire, two main attitudes

regarding the code were observed. On the one hand, about half of the

respondents found that it was an opportunity to make people think and

discuss how behaviour can impact their colleagues. Furthermore, it increased

the awareness of each individual’s responsibility as well as the responsibility

that IKEA has for its personnel. On the other hand, a neutral attitude

regarding the code of conduct was found, due to the fact that the code

contains rules that are applied in most Swedish companies.

In other words, the respondents think that the code of conduct is good, but it

might not affect IKEA’s Swedish workers as much as other IKEA’s

employees in other countries. They quoted China as an example. Accordingly

employees answered unanimously that the code did not change anything in

their present working life. Regarding the trust line, comments follow the

previous tendency in that it has no impact, or at least not yet, at IKEA

Karlstad. Most of the employees think that they will not make use of this

platform. However, they do not perceive employees’ report on misbehaviour

as useful as it would be in other countries.

34

4.6. Answers from the quantitative questionnaire

To enforce our qualitative results, we decided to generate statistics by

conducting a quantitative survey as detailed in the methodology. Each of the

following diagrams was based on the results from our quantitative

questionnaire available in Appendix 6.

Neutral answers are dominating regarding the impact on employees; followed

by the answers with positive impact. The number of answers for the negative

impact is very low. We can say that the CSR actions have an overall positive

effect. We can observe that”People and Planet Positive”, Shopkeepers as well

as Samhall have a real impact on the employees, while the IWAY, Steve

Howard and the Code of Conduct have a minor impact.

Figure 15: Bar chart representing the impact of CSR actions on the IKEA employees.

The impact on the environment is rather divided. A positive impact is

apparent for Steve Howard, PPP and IWAY. However, Shopkeepers, Code of

Conduct and Samhall have a neutral impact. Similarly to the previous bar

chart, the negative impact is almost non-existent. People and Planet Positive

has a huge impact (88.1%) on the environment. The low impact of

Shopkeepers, Code of conduct and Samhall can be explained by their goals

which are focused on employees and the community rather than the

environment.

35

Figure 16: Bar chart representing the impact of CSR actions on the environment.

Most of the actions have a positive impact on community. Once more, the

negative effect is nearly non-existent. However according to employees, Steve

Howard and shopkeepers globally have a neutral impact on the community

justified by their focus on the employees.

Figure 17: Bar chart representing the impact of CSR actions on the community.

In the first place we asked employees if they thought sharing the same values

with IKEA (Appendix 5). 94% of the respondents agreed sharing the values of

IKEA. Then, in order to test their answers, we asked them to select values

from a list made with the IKEA values and random ones. The six first values

selected by the respondents are shared by IKEA. Consequently, we can affirm

that IKEA values are deeply rooted in the company culture and employees

36

minds. We can also confirm that values resonance is occurring between the

company and its workers.

Figure 18: Bar chart representing the values shared by the IKEA employees.

Both the Shopkeepers and PPP projects have a major impact on the

employees working life. However the IWAY, the Code of conduct, Steve

Howard as well as the Samhall collaboration have no impact. Almost one third

of the interrogated employees did not answer the question because they did

not see any impact on their working life.

Figure 19: Bar chart representing the impact of CSR actions on the employees working life.

37

Only People and Planet Positive has a significant impact on the employees’ life outside the work. PPP action aims to improve the life of IKEA customers and IKEA employees. As the previous question, the non-response rate is very high (49.3%).

Figure 20: Bar chart representing the impact of CSR actions on the employees’ life outside

IKEA.

The above chart shows that only the Shopkeepers implementation has a real

positive impact on the productivity and the well-being of the employees.

Furthermore, the non-response rate is equally significant. We can conclude

that nearly 50% of employees think none of these actions have an impact on

their productivity or their well-being.

Figure 21: Bar chart representing the impact of CSR actions on the productivity and well-

being of IKEA employees.

38

5. ANALYSIS AND DISCUSSION OF THE RESULTS

In this chapter, concepts from IKEA presented in the empirical study will be

analysed one by one following the structure of Figure 2 from the theoretical

framework. Firstly, the type of stimulus at the basis of the managerial

innovation will be determined. Secondly, we will identify which categories of

innovation are involved in each CSR action: technological, management,

administrative or organizational innovations. Then, the impact of these

managerial innovations through CSR within IKEA will be analysed. Finally,

hypotheses developed in the introduction will be discussed based on our

analysis.

5.1. Analysis of Steve Howard’ employment

Figure 22: Analysis of Steve Howard’ employment

5.1.1. A CSR strategy stimulus

According to Birkinshaw et al. (2008), the trigger element for managerial

innovation can be of different types. In this case, the stimulus cannot be

identified as technological innovation because no technology was involved.

The goal of this action is to secure the company future and the way IKEA is

conducting business. Kytle and Ruggie (2005) mentioned that risk

management is by definition a component of CSR. Consequently, the

employment of Steve Howard appears to be from a CSR strategy stimulus.

5.1.2. Organizational Innovation is the only component of Steve Howard’ employment

Damanpour and Aravind (2011) define organizational innovations as new

organizational structures in a company. The creation of a new position can be

interpreted as an organizational innovation since it modified the structure of

the Sustainability Department. Sustainability managers existed before Steve

39

Howard’ employment to control the CSR strategy in each store, but there was

no higher position leading the whole group10.

5.1.3. An impact represented by intangible value through values resonance.

As observed in the presentation of questionnaires’ results, no real impact of

value occurred at that time. According to the definition of value from

Grönroos (2012), there is no value measurable in financial terms for this

action. Nevertheless some positive attitudes towards the company have been

created through Steve Howard’ employment. These attitudes can be described

as an intangible value for the company. The positive value was created in

accordance with the concept of values resonance (Enquist 2012). As shown in

the Figure 18, employees share values such as friendship and responsibility

with IKEA. The background of Steve Howard and his sustainable values

matches the corporate values of IKEA, resulting in values resonance between

the new Chief Sustainability Officer and employees.

5.2. Analysis of the People & Planet Positive Project

Figure 23: Analysis of the People & Planet Positive Project

5.2.1. A CSR strategy stimulus

Such as Steve Howard’ employment, the motivation of PPP is from another

stimulus than technological innovation (Birkinshaw et al. 2008). According to

the information collected through the interview with Magnus Engstrand, the

motivation of this new strategy is purely CSR. IKEA has a sincere wish to help

its community and to reduce its impact on the environment as well as to

educate its customers. For instance, through actions like “better cotton” and

LED lighting, IKEA wants to improve the life condition of its customers with

more sustainable products. IWAY provides a protection for IKEA’s

community and suppliers’ employees by establishing strict rules regarding child

10

Magnus Engstrand local IT and sustainability coordinator, survey on the 2th April 2013

40

labour, environment safeguarding and employee welfare. As defined in the

theoretical framework, the consideration of natural resources and the

community by IKEA belongs to creating shared value, which is a component

of CSR (Porter and Kramer 2006).

5.2.2. People & Planet Positive project involves both managerial innovation and technology

For People & Planet Positive, we observed that arising actions are composed

of both managerial and technological innovations. When a company develops

a strategy at a global scale, it is required to educate all the managers and

employees to diffuse at best its values to the customers. Educating falls under

management innovation category as it concerns the way managers operate

with their working teams and deal with the new system (Damanpour &

Aravind 2011).

Technological innovation is also involved as several actions are based on new

materials, or new ways to produce materials. For example LED is a new

technology reducing the consumption of energy from lighting. IKEA’

independence in terms of energy might as well lead to technological

innovations regarding the production of green energy. In this project, technical

progresses constitute with managerial innovation a key element to create value

for IKEA (Krauss et al. 2012)

5.2.3. Values resonance impacting IKEA employees’ behaviour

As PPP is a long-term strategy spread over seven years and some initiatives are

still at an implementation phase, results are not available yet. Outcomes of the

IWAY, which has the closest deadline, will be available in 2014. We cannot

analyse the impact of values resonance and created value based on IKEA’

documents. Values regarding environmental issues propagated by PPP match

the stakeholders’ values, resulting in values resonance (Enquist 2012). Most of

the employees (88.1%) think “People and Planet Positive” project has a

positive effect not only on the environment but also on them (41,8%) and on

the community (41,8%). Even if statistics from Figure 25 show that PPP has

not impact on the productivity and well-being of IKEA employees, it has an

important impact in two different aspects. Firstly, it enhances the

communication between customers and employees on environmental issues,

and thus it also enhanced service quality. Secondly, it improves a quality of life

on certain workers at both the workplace (20,9%) and the home (38,8%).

41

Therefore, the impact of this project can be categorized as intangible value

according to Grönroos (2012).

5.3. Analysis of the Code of Conduct and Trust line

Figure 24: Analysis of the Code of Conduct and Trust Line

5.3.1. A Corporate Culture stimulus

As the motivations in the two preceding actions, the stimulus of the Code of

conduct also differs from technological innovation. The purpose of this action

was to unify the culture and employees’ behaviour all around the world

according to IKEAs values. This stimulus could be referred to a corporate

culture stimulus.

5.3.2. A combination of administrative and organizational innovations

Regarding the different categories of managerial innovation, we can associate

the universal code of conduct to an administrative innovation according to the

definition given by Evan (1966). In other words, it influences the Human

Resources policy in terms of hiring and dismissals. All employees have to

respect this code to be part of the IKEA Company. The trust line can be

identified as an organizational innovation as it involves the creation of a new

internal structure (Damanpour & Aravind 2011).

We remain sceptical on the involvement of technology in reference to the trust

line. However from our point of view, it would not constitute a technological

innovation because even though the purpose and the name might be new, the

technology used is not innovative. All the scholars quoted in part 2.3 from the

theoretical framework, consider technological innovation as being

42

technological progress. Therefore a new call centre does not constitute a

technological innovation.

5.3.3. A value resonance resulting in a neutral impact on IKEA

Like the other projects, values transmitted by the code of conduct are IKEAs

corporate values, based on Swedish culture. Consequently, values resonance

occurs (Enquist 2012). In contradiction with the theoretical framework, it does

not result in positive value among employees. A majority of employees

(56.7%) answered the code of conduct had a neutral impact on them. The

neutral attitude towards the code of conduct and the trust line is due to the

sharing of common values. The quantitative study shows the majority (94%)

of employees share the values of the company. Results from qualitative

questionnaires state that it might be valuable in other countries where values

dissonance would occur. 61,2% of IKEA employees considers the code of

conduct as having a positive impact for the community. Answers from the

qualitative questionnaire highlight that the positive impact would occur if the

community does not share the IKEA values.

5.4. Analysis of the IWAY

Figure 25: Analysis of the Iway.

5.4.1. A CSR strategy stimulus

As stated in the presentation of the results, this chart was clearly created with a

CSR objective. Its environmental and social concerns regarding child labour,

welfare of the workers and the protection of the environment are part of

Created Shared Value described by Porter and Kramer (2006). Consequently,

its stimulus matches a CSR strategy.

43

5.4.2. An administrative and organizational innovation

The implementation of the IWAY within the IKEA group and its suppliers

involves changes in terms of managerial innovation. The diffusion of a new

official chart includes a global information system between the organization

and its business partners, as the IWAY requires an efficient communication.

IKEA needs to collect but also give information to their suppliers. A

modification of the information system has to deal with administrative

innovation (Evan 1966). To ensure the viability of its partners, IKEA had to

enforce its audit department to control that the chart is respected. Hence,

audit departments have been created in every country. Even if IKEA uses a

third party too for their auditing, they had to create a controlling network

alongside the IWAY. Consequently, the structure of the audit department has

been modified, which corresponds to an organizational innovation

(Damanpour & Aravind 2011). The new structure was created to fulfil specific

needs of IKEA.

The IWAY is a good example of how a company can implement a managerial

innovation without any need of technological innovation. Of course,

technology is used to collect data and to audit companies but there is no

technological innovation to create value following the theories of Den Hertog

(2010) and Birkinshaw et al. (2008).

5.4.3. A values resonance resulting in a decrease of the corruption

In regard to the results, the IWAY started to decrease the corruption between

IKEA and its providers11, which were chiefly represented by invitations to

restaurants, travels, goodies etc. So we can say that implemented managerial

innovations had a positive impact on communities and the company with

intangible value (Grönroos 2012). Our though is enforced by Figure 17, in

which IWAY is perceived as positive for the community (67.2%).

Communities are also positively impacted with the prohibition of child labour

and working conditions.

11

Magnus Engstrand local IT and sustainability coordinator, survey on the 19th

March 2013

44

5.5. Analysis of Shopkeepers’ implementation

Figure 26: Analysis of Shopkeepers’ implementation.

5.5.1. Unified Leadership as a stimulus

Once more the stimulus is not technological and not particularly CSR. In the

same way as the code of conduct unifies the company culture, the

implementation of the shopkeepers aims to unify the leadership in all the

stores and gain more control over every department. The only link between

the stimulus and CSR would be risk management (Kytle & Ruggie 2005).

Unifying the leadership reduces risks linked to management problems.

5.5.2. Organizational and management innovations as a central element of shopkeepers

The shopkeeper project can be labelled as an organizational innovation

because it constitutes a change in the organizational chart of the company. It

can also refer to management innovation as it modifies the way managers take

decisions in regard to their new responsibilities (Damanpour & Aravind 2011).

To our knowledge, there is no technological innovation involved in the

shopkeeper implementation.

5.5.3. A positive impact reflected by an increase of trust among workings teams

The link between this managerial innovation and CSR is that the

implementation of low-level managers has enforced the relation between

employees and their managers. The implementation of the shopkeepers in the

store had the most significant effect on the employees (57.7%). This action

implies a positive impact on employees by the way of a structure more

efficient, a better sale process, and the creation of a trust relationship between

managers and the staff. According to Magnus Engstrand12, shopkeepers have

increased the trust within working teams in the different departments. The

12

Magnus Engstrand local IT and sustainability coordinator, survey on the 2th April 2013

45

increase of trust can be categorized as intangible value (Grönroos 2012).

5.6. Analysis of Samhall collaboration

Figure 27: Analysis of Samhall collaboration.

5.6.1. A CSR strategy stimulus

According to Tilcsik and Marquis (2013), collaborating with an organization to

help the community refers to the first component of CSR: corporate

philanthropy. Thus, the stimulus for managerial innovation is a CSR strategy.

5.6.2. An important contribution of management Innovation and organizational Innovation to improve CSR

The integration of Samhall workers includes different managerial innovations

such as management and organizational innovations (Damanpour & Aravind

2011). IKEA has to educate its managers and personnel to be mindful of the

special status and needs of the Samhall workers in order to give them the best

integration within the store 13 . Furthermore Samhall employees need to be

trained and instructed to learn about the corporate culture, values and the

purpose of their missions. Consequently, this action can be qualified as a

management innovation because it involves many changes regarding the

education of employees and human resources management. Furthermore, the

integration of Samhall employees can be categorized as an organizational

change because it is part of a subcontracting process. Furthermore, Samhall

has an office and its own managers within IKEA, which leads to modifications

of IKEAs store structure.

13

Magnus Engstrand Local IT and sustainability coordinator, email on the 23rd

April 2013

46

5.6.3. Positive impact on IKEA employees and the community due to values resonance

According to the results of our questionnaire among IKEA employees, we

observed positive feelings towards the Samhall workers. Employees think this

collaboration is both beneficial for the company and the community. IKEA

has a positive impact on the community (71.6%) and on the employees

(49,3%) with the Samhall collaboration. This result is explained by the efforts

IKEA make to employ disabled people and to integrate them in the

workplace. Due to the positive impact on the community we assume that the

internal and external image of IKEA is improving regarding CSR. Moreover,

Samhall allows IKEA employees to be more concentrated on their tasks by

doing their missions14.

5.7. Discussion of the case study results

5.7.1. Discussion of Hypothesis 1: Involvement of technological innovation in value creation process

Our first hypothesis mentioned that technological innovation could be

considered as a potential trigger element for managerial innovation

(Birkinshaw et al. 2008). Technological innovation is therefore optional in

bringing value to the company (Den Hertog 2010). What we learned from the

IKEA case study shows that these concepts can be applied with a practical

relevance. We cannot absolutely affirm or demonstrate this point as we

focused more on qualitative research rather than quantitative. However,

concrete examples go along with our first hypothesis and bring more details.

For instance, the implementation of shopkeepers did not necessitate any

technological innovations to increase trust between working teams,

contradicting theories from Kraus et al. (2012) and Chesbrough (2010). We

remain convinced that the code of conduct and IWAY will bring value in

other countries without any need of technological innovation (as well).

Additionally, the People & Planet Positive project brings another point of

view, which is presented in Figure 2 at the beginning of the thesis. Regarding

the answers from our questionnaire, PPP is one of the projects that has the

most important positive impact on the company; however this project

combines both managerial innovation and technological innovation. The

project PPP including LED innovation, enforced by the education of

employees, leads to a more sustainable and environmental friendly living both

14

Questionnaire on Managerial Innovation and Corporate Social Responsibility destined at the Karlstad IKEA store employees on the 26

th April 2013

47

professionally and personally for the workers. This observation supports the

theory of Damanpour and Aravind (2011) from the theoretical framework,

which emphasises that technological innovation can either be a trigger

element, a support element or a result of managerial innovation. To sum up,

examples support that managerial innovation can bring value alone but that

integration of technological innovation in the process is possible as well.

5.7.2. Discussion of Hypothesis 2: Different types of value are brought by managerial innovation

According to Grönroos (2012), we stated that managerial innovation could

bring three different types of value: intangible value, tangible value as well as

negative value. Regarding the analysis of the different actions released by

IKEA, we observed an absence of tangible value in the impact of managerial

innovation on CSR. This observation can be explained through two aspects.

The first aspect is that IKEA does not have the financial results from its

projects yet as they are mainly at the development or implementation stage.

Therefore, financial results will be available one business year after the end of

implementation processes. The second aspect is that there is no financial

impact on the company because the main goal of these projects is to create

intangible value. Financial value would be created indirectly by the increase of

employees’ productivity, service quality or well-being at the workplace

(Edvinsson & Malone 1997). Currently, the lack of financial documents does

not allow us to affirm or refute our second hypothesis. The case study shows

that managerial innovation can directly bring intangible value to the company

even at the early stage of implementation. Analysis of the projects also shows

that if managerial innovation has an impact on financial performance, it might

be indirect and appear later on.

5.7.3. Discussion of Hypothesis 3: Values resonance and Values dissonance

In the theoretical framework, we mentioned the need of values resonance

between companies and their stakeholders in order to create intangible value

(Enquist 2012). However in the empirical part, this hypothesis appears to be

contradicted in some regards. If we take a look at the results brought by the

implementation of the Code of Conduct, we observe that there is no real

impact on Swedish employees or at least not enough to be valuable here in

Karlstad with 56.7% of neutral answers. Regarding theories, Swedish

employees and IKEA share the same values so values resonance should occur

resulting in intangible value. Nevertheless, in answering our questionnaire,

48

workers mentioned that this innovation did not bring a lot of value to them

but would be more valuable for countries which do not share Swedish values.

The gap between values should result in a value dissonance instead of having

positive results. Consequently, we assume that in certain cases, value

dissonance does not constitute a barrier for value creation. For example, the

code of conduct implemented in Asian countries could have a positive impact.

Working and living conditions of Asian employees at IKEA or suppliers’

workers could improve through the IWAY. The difference between values in

this case would lead to the creation of value for the personnel. We do not

refute that values may drive value but we found an example contradicting the

third hypothesis represented in Figure 12, which stated that value resonance

leads to positive value and value dissonance to negative value.

5.7.4. Discussion of managerial innovation involvement in CSR

As perceived in our case study, managerial innovation has a significant link

with Corporate Social Responsibility and plays an important role in these

actions. Nonetheless, its involvement can be different according to projects.

Thus, managerial innovation can either be a support or a central element of

the implementation process of CSR projects. These options can be illustrated

for example in People and Planet Positive, where managerial innovation only

concerns the education of managers and workers. It therefore constitutes a

supporting part of the process since PPP mainly depends on technological

innovation and other factors. On the contrary, shopkeepers or IWAY are

entirely based on managerial innovations. Implementation of these projects

would not be possible without these innovations, as they constitute the heart

of both projects. Additionally we can observe in the case study that all types of

managerial innovation can be used in order to complement CSR actions. In

IKEAs new concepts: management innovation is used to educate managers,

organizational innovations constitute the need of change regarding the

structure and administrative innovations concerns new corporate documents,

charts or information systems. These observations confirm the role played by

managerial innovation in CSR represented in the theoretical framework.

5.8. Limitations of the study

Regarding the amount of time to conduct this study, financial documents were

not available, thus limiting our analysis of potential tangible value brought by

managerial innovation. Although the thesis is analysing projects for a short

period, four months, these actions are planned over several years and could

49

change or evolve. Thus, the impact of managerial innovation might also

change from what we can observe presently. Our study is focused on IKEA

Karlstad and effects on its employees and community; therefore results cannot

be generalized throughout the group. Although quantitative aspects were also

considered at the beginning of the writing process, unfortunately surveys

documents were not accessible to us. By conducting our own questionnaires

targeting employees’ attitudes towards the CSR projects, we intended to

overcome this obstacle.

50

6. CONCLUSION

6.1. Final conclusion

The goal of this thesis was to get a deeper understanding of managerial

innovation’s impact on CSR. To achieve this purpose we intended to answer

the following research questions through IKEA case study:

We found that managerial innovation was motivated by different stimulus.

None of them actually included technological innovation, supporting our

arguments that it does not represent a mandatory element for managerial

innovation to impact CSR.

We observe that managerial innovation can be either a central or supporting

element of CSR actions. However, each type of managerial innovation can be

used to implement CSR actions in a company.

The observation was made that intangible value is the main impact of

managerial innovation on CSR. Tangible value such as financial aspects were

impossible to study since most of the projects were at the implementation or

planning stage. We did not observe negative value, only neutral attitudes from

employees toward some actions. Therefore we can only confirm that one of

the three types of value can be brought to a company. In contrast to the

theoretical framework, values resonance did not bring systematically value

whereas values dissonance may be positively valuable in certain cases.

6.2. Suggestions for further research

Considering the discussions highlighted in this thesis, further researches are

needed in the field of managerial innovation on several aspects. Firstly, direct

measuring means for the implementation of managerial innovations would

facilitate companies to identify its benefits. Considering managerial innovation

as a trigger element for CSR could bring deeper knowledge on managerial

innovation and CSR links. Which could generate an observation of how

different types of managerial innovations can create different types of value.

Further qualitative studies involving concrete examples are needed to make

this concept more accessible to professionals, companies, students and

researches. Following our discussion on value, more studies should be done to

51

develop a better understanding of values dissonance and resonance effects. As

our thesis was focus on qualitative analysis of the concepts and even if we

found contradictions to the theories in practical relevance, our results cannot

be generalized. Consequently, quantitative studies on managerial innovation

impact on companies have to be conducted at a larger scale.

52

7. REFERENCES

Balabanis, G., Hugh, C. & Phillips, J. L. (1998). ‘Corporate social responsibility

and economic performance in the top British companies: are they

linked?. European Business Review, 25 – 44

Birkinshaw, J. & Mol, M. (2006). How management innovation happens. Sloan

Management Review, 47, 81–88.

Birkinshaw, J., Hamel, G. & Mol, M.J. (2008). Management Innovation.

Academy of Management Review, 33, 825–845.

Bowman, C. & Ambrosini, V. (2000). Value Creation Versus Value Capture:

Towards a Coherent Definition of Value in Strategy. British Journal of

Management, 11, 1–15.

Bryman, A. & Bell, E. (2011). Business Research Methods. Oxford University

Press: Oxford

Chesbrough, H. (2010). Business model innovation: opportunities and

barriers. Long Range Plann, 43, 354–363.

Damanpour, F. & Aravind, D. (2011). Managerial Innovation: Conceptions,

Processes, and Antecedents. Management and Organization Review, 8, 423–454.

Danna, K. & Griffin, R.W. (1999). Health and Well-Being in the Workplace:

A Review and Synthesis of the Literature. Journal of Management, Vol. 25, No. 3,

357–384.

Dawkins, J. & Lewis, S. (2003). CSR in Stakeholder Expectations: And Their

Implication for Company Strategy. Journal of Business Ethics, 185–193.

Den Hertog, P. (2010). Managing service innovation: firm-level dynamic capabilities and

policy options. Diss. Amsterdam: the institutional repository of the University of

Amsterdam.

Edvinsson, L. & Malone, M. (1997). Intellectual Capital. HarperBusiness: New

York.

53

Eisenhardt, K.M. (1989). Building Theories from Case Study Research. The

Academy of Management Review, Vol. 14, No. 4, pp. 532-550.

Enquist, B. & Edvardsson, B. (2012). Values based service for sustainable business.

Lessons from IKEA. Lecture 2012.10.08

Evan, W.M. (1966). Organizational lag. Human Organizations, 25, 51–53.

Forbes (2013).The world’s most innovative companies. Available:

http://www.forbes.com/special-features/innovative-companies-list.html

[2013-04-09].

FSC (2013). Notre vision et nos missions. Available: http://fr.fsc.org/notre-

vision-et-nos-missions.181.htm [2013-04-20]

Garriga, E. & Melé, D. (2004). Corporate Social Responsibility Theories:

Mapping the Territory. Journal of Business Ethics, 53, 51–71.

Greenbiz (2013). Ikea’s Steve Howard on bringing Sustainability to the masses.

Available: http://www.greenbiz.com/blog/2012/02/23/ikeas-cso-steve-howard-

bringing-sustainability-masses [2013-04-20]

Gronroos, C. (2012). Service logic revisited: who creates value? And who co-

creates?. European Business Review, 20, 298-314.

IKEA Group (2008). IWAY Standard: Minimum Requirements for Environment and

Social & Working Conditions when Purchasing Products, Materials and Services.

IKEA Group (2012a). Good business with common sense : introducing the IKEA

Group Code of Conduct.

IKEA Group (2012b). 2012 Facts & Figures, September 2011 - August 2012

IKEA Group (2012c). IKEA group sustainability summary FY 2012

IKEA Group (2013a). Le groupe IKEA. Available:

http://www.ikea.com/ms/fr_FR/about_ikea/facts_and_figures/about_ikea_group/i

ndex.html [2013-04-11].

IKEA Group (2013b). Inter IKEA Systems B.V. Available:

http://franchisor.ikea.com/ [2013-04-24]

54

IKEA Group (2013c). FAQ. Available:

http://www.ikea.com/ms/fr_FR/about_ikea/the_ikea_way/faq/index.html

[2013-04-24]

IKEA Group (2013d). IKEA tout simplement. Available:

http://www.ikea.com/ms/fr_FR/jobs/simply_ikea/index.html [2013-04-25]

IKEA Group (2013e). Inter IKEA Group Organisation. Available:

http://www.inter.ikea.com/governance/organisation/ [2013-05-07]

Kraus, S., Pohjola, M. & Koponen, A. (2012). Innovation in family firms: an

empirical analysis linking organizational and managerial innovation to

corporate success. Review of managerial science, 6, 265–286.

Kytle, B. & Ruggie, J.G. (2005). Corporate social responsibility as risk

management. Corporate Social Responsibility Initiative, 1- 15

McGuire, J., Schneeweis, T. & Hill, J. (1986). “An analysis of alternative

measures of strategic performance”. Advances In Strategic Management, 4, 107-53.

Murthy, S.N. & Bhojanna, U. (2009). Business Research Methods. Excel Books:

Delhi.

Porter, M.E. & Kramer, M.R. (2006). Strategy and Society: The link between

competitive advantage and corporate social responsibility. Harvard Business

Review, 78-94

Riege, A.M. (2003). Validity and reliability tests in case study research: a

literature review with “hands-on” applications for each phase. Qualitative

market research: An international journal, 6, 75-86.

Samhall (2013). About Samhall. Available: http://www.samhall.se/In-

English/About-Samhall/ [2013-05-03]

Swedwoos Group (2013). Swedwoos. Available: http://www.swedwood.com/

[2013-04-25]

Teece, D.J. (2010). Business models, business strategy and innovation. Long

Range Plan, 43, 172–194.

55

Tilcsik, A. & Marquis, C. (2013). Punctuated Generosity: How Mega-events

and Natural Disasters Affect Corporate Philanthropy in U.S.

Communities. Administrative Science Quarterly, 58, 111-148.

The Climate Group (2013). The climate group. Available:

http://www.theclimategroup.org/who-we-are/ [2013-04-20]

Thomasdottir, J.K. (2011). IKEA Shop keeper: An assessment of tasks and

competencies. Diss. Lunds: Department of Psychology, Lunds Universitet.

Waddock, S. & Bodwell, C. (2007). Total Responsibility Management: The Manual.

Greenleaf Pubns: Sheffield

Yin, R.K. (1994), Case Study Research: Design and Methods. Sage: Newbury

Park.

Zahra, S.A., Neubaum, D.O., & Huse, M. (2000). Entrepreneurship in

medium-size companies: Exploring the effects of ownership and governance

systems. Journal of Management, 26: 947–976.

56

8. APPENDIX

Appendix 1: A four dimensional model of service innovation by den Hertog

(2010)

57

Appendix 2: Survey of Magnus Engstrand local IT and sustainability

Coordinator on the 19th March 2013

What are the latest actions implemented in terms of CSR within IKEA?

What are the main objectives of these actions?

Are you already aware of some results among employees/customers/partners?

How do you measure the impact of CSR on your customers?

How do you measure the impact of CSR on your employees/partners?

What are the latest managerial actions implemented to improve employee

productivity, company efficiency etc.?

What are the latest managerial actions implemented to improve the company's

image?

What was the process to implement these new managerial actions?

What was the motivation at the roots of these new actions?

58

Appendix 3: Interview of Magnus Engstrand local IT and sustainability Coordinator, on the 2th April 2013

People & Planet Positive – You quoted several of your goals but can you give

us at least some examples of administrative, structural, or managerial changes

involved to reach them? Or detail all the main changes if possible for one goal

that we can analyse in our thesis.

Iway – Since when does the Iway was set up? What are the criteria present in

the Iway? From our point of view, the Iway involves administrative changes

and structural because you do your own audit, how do you process to select

your suppliers? Do you have a special department for this?

Survey on customers – Could you observe a change in the customers

perception of the company following to CSR actions you mentioned?

VOICE – Who is in charge of the survey? Does the questionnaire change

every year? Could you observe a change in employees’ perception following

some managerial innovations?

Technical innovation – Do you have a recent example? Does it include

managerial innovations to implement this one?

Shopkeepers – Is there any link with CSR actions, you speak about one

shopkeeper for textile area and you mentioned that one of your goal is that all

your cotton is according to the better cotton initiative. What does it involve

for the shopkeeper?

Code of conduct – What was the impact of this code on your employees? On

your image? What were the changes involve implementing this code.

Steve Howard – Does the position of Chief Sustainability Officer existed

before or was it created for him? How do you know it improved or will

improve your image?

Corruption – Can you develop a little more on the impact of the code of

conduct regarding to corruption with one example?

NEL – Can you explain us what is the Never Ending List?

59

The testament of a furniture dealer – In this document, the values of the

company are presented. We just want to know if you have any survey or prove

that your customers and employees share the same values

IKEA foundation – What are the different soft toys you have? Does it involve

any managerial changes? Does the fact that one euro is donated is indicated to

the customers?

60

Appendix 4: Questionnaire on Managerial Innovation and Corporate Social

Responsibility destined at Karlstad IKEA store employees

Survey context:

We are two French students from business school doing a double degree

program in service management at Karlstad University. We are presently

writing our master thesis on the impact of managerial innovation on

Corporate Social Responsibility. In other words, how managerial innovation

can be involved in CSR actions and what are the results of this combination.

This survey aims to provide some results, feelings from employees about some

CSR actions where managerial innovations were included. We want to see if

these actions brought value for IKEA and its employees.

Questions:

What are your thoughts regarding the code of conduct?

Did the code of conduct change your working life at IKEA? If yes, in which

way?

What benefits do you think the trust line can bring to you?

What benefits does IKEA offer to the “Samhall”? What advantage IKEA can

have working with Samhall?

Do you think Steve Howard brought a fresh new strategy to IKEA? Did his

employment change anything in your perception of IKEA?

What can of value do you think People Planet Positive (PPP) can bring to you

in your professional and personal life?

62

Appendix 5: Qualitative questionnaire on Managerial Innovation and Corporate Social

Responsibility destined at Karlstad IKEA store employees

Survey context: We are two French students from business school doing a double degree program in service management at Karlstad University. We are presently writing our master thesis on the impact of managerial innovation on Corporate Social Responsibility. This survey aims to provide some results, feelings from employees about some CSR actions where managerial innovations were included. We want to see if these actions had a positive impact on employees, community and environment.

Question n°1: Estimate the impact of these projects: (1 = negative impact, 2 = rather negative impact, 3= neutral, 4 = rather positive impact, 5= positive impact)

Steve Howard Code of conduct On you On you 1 2 3 4 5 1 2 3 4 5

On the environment On the environment 1 2 3 4 5 1 2 3 4 5

On the community On the community 1 2 3 4 5 1 2 3 4 5

People and Planet positive project IWAY On you On you 1 2 3 4 5 1 2 3 4 5

On the environment On the environment 1 2 3 4 5 1 2 3 4 5

On the community On the community 1 2 3 4 5 1 2 3 4 5

Samhall Shopkeepers On you On you 1 2 3 4 5 1 2 3 4 5

On the environment On the environment 1 2 3 4 5 1 2 3 4 5

On the community On the community 1 2 3 4 5 1 2 3 4 5

63

Question n°2: Do you think, you share the values of IKEA? YES NO

Question n°3: Could you pick 4 values that are important to you in this list? Autonomy Cohesion Diversity Friendship Give example

Hedonism Humility Individualism Responsibility Tradition

Question n°4: Which one of these projects had a positive impact on your working life?

Shopkeepers

Samhall

Steve Howard

employment

People & Planet Positive

Iway

Code of conduct

None of them

Question n°5: Which one of these projects had a positive impact on your everyday life outside the workplace?

Shopkeepers

Samhall

Steve Howard

employment

People & Planet Positive

Iway

Code of conduct

None of them

Question n°6: Did any of these managerial innovations improved your productivity or welfare at IKEA?

Shopkeepers

Samhall

Steve Howard employment

People & Planet Positive

Iway

Code of conduct

None of them

Appendix 6: Results of the qualitative study

Question n°1: Estimate the impact of these projects

Question n°2: Do you think, you share the values of IKEA?

Question n°3: Could you pick 4 values that are important to you in this list?

Question n°4: Which one of these projects had a positive impact on your working life?

Question n°5: Which one of these projects had a positive impact on your everyday life outside the workplace?

Question n°6: Did any of these managerial innovations improved your productivity or welfare at IKEA?