Grassroots innovation success: The role of self-determination and leadership style

Highlights

• An increasing number of firms engages in grassroots innovation.

• Grassroots innovation has a significant impact on firms’ innovation performance.

• Emphasizing employee self-determination increases grassroots innovation performance.

• The benefits of employee self-determination are contingent on a firm’s leadership style.

• The benefits of employee self-determination are contingent on a firm’s market orientation.

Abstract

An increasing number of firms engage in grassroots innovation, i.e., the voluntary generation and development of innovations by any member of an organization, regardless of function or seniority. However, no empirical study to date identifies the determinants of success or failure of grassroots innovation initiatives. We execute a survey study among 3,728 managers in 14 countries, 2,353 of which (63.1%) had already engaged in grassroots innovation. We find that, on average, firms that adopt grassroots innovation outperform firms that do not. We also find that firms that enable (1) employee autonomy, (2) competence development, and (3) relatedness (i.e., helping employees establish mutually beneficial relationships with trusted colleagues) in their grassroots innovation initiatives outperform firms that do not. We document that such effects are contingent on a firm’s institutional environment (i.e., leadership style and market orientation). For instance, the lower the market orientation and the higher the hierarchical leadership of the firm, the higher the performance returns the firm obtains from fostering autonomy and relatedness in grassroots innovation. These findings encourage managers and firms to adopt (or persist in their) grassroots innovation initiatives, to infuse them with sufficient autonomy, competence, and relatedness and match them with the right leadership style.