Process In Learning Organization

Published Date: 02 Nov 2017

CHAPTER 2

In general, many researchers have categorized process in learning organization into two stages (Argyris & Schon, 1978; Duncan & Weiss, 1979; Fiol & Lyles, 1985; Hedberg, 1981; Kim, 1993; March, 1991; Senge, 1990; Slater & Narver, 1995)

Argyris and Schon (1978) defined learning process as "Single-Loop Learning" and "Double-Loop Learning". Single-loop learning occurs when errors are detected and corrected without changing the underlying governing policies or values of the organization. Double-loop learning occurs when, in addition to the detection and correction of errors, the organization questions and modifies its existing norms, procedures, policies, and objectives.

Duncan and Weiss (1979) defined learning process as "Behavioral-Level Learning" and "Strategy-Level Learning". Behavioral-level learning is control organization when it adjusts to the environment, and makes decisions for routine work. Strategy-level learning focuses on cognitive development and adjusting overall rules and norms.

Hedberg (1981) defined learning process as "Primary-Level Learning" and "Meta-Level Learning". Primary-level learning occurs merely to adjust parameters in a fixed structure to varying demands. Meta-level learning occurs to change norms, values, and world views.

Fiol and Lyles (1985) defined learning process as "Lower-Level Learning" and "Higher-Level Learning". Lower-level learning focuses on short-term, surface, temporary learning and more repetition of part behavior. Higher-level learning focuses on developing complex rules and associations regarding new actions that affect the whole organization.

Senge (1990) and Slater and Narver (1995) defined learning process as "Adaptive Learning" and "Generative Learning". Adaptive learning focuses on learning within existing routines or the traditional scope of the organization’s activities. Generative learning requires new ways to look at the world, question long-held assumption and existing routines.

March (1991) defined learning process as "Exploitation" and "Exploration". Exploitation focuses on learning by using, developing, or refining the existing competencies. Exploration focuses on learning by pursuing new knowledge, experiment with new alternatives.

Kim (1993) defined learning process as "Operational Learning" and "Conceptual Learning". Operational learning acquires skills or know-how, which implies the physical ability to produce some action. Conceptual learning acquires knowledge or knows why, which implies the ability to articulate a conceptual understanding of an experience.

Generally, within organizations adopt both forms of the learning process are important – lower-level/adaptive/single-loop learning in routines, repetitive situations, and higher-level/generative/double-loop learning in complex situations (Argyris, 1993). Adaptive learning and other types can be considered doing things better, as a result of incremental changes in knowledge structures. This refers to a form of learning that reflects improvement or increases within the current system of rules, procedures, mental models, and paradigms. Levitt and March (1988) construed that adaptive learning occurs in two ways: the first is the trial-and-error process in which successful routines are identified and used; the second is organizational search in which organizations adopt from a wider array of routines those that are congruous with their present way of behaving and integrate those that appear to work. Generative learning and other learning involve doing things differently as a result of radical shifts in knowledge structures. This form of learning tends to question, alter, or break away completely from the current system. Dodgson (1993) indicated that dissatisfaction emanated from "uncertain technology and market circumstances" (p. 378), and concerns about the ability to respond effectively to the competitive challenges generally compel an organization toward generative learning.

2.5 Levels of Learning Organization Process

The learning organization process could happen at different levels, which are: individual, group or team, and organizational level. Individuals are cognitive, and tend to consciously gain new knowledge during the working process. This is an important element of the learning organization process. Group or team level is the next level, which creates a learning organization process.

2.5.1 Individual Learning Level

Many scholars considered individual learning as the foundation for the learning organization process (Argyris & Schon, 1978; Senge, 1990; Simon, 1991; Marsick & Watkins, 2003). According to Argyris and Schon (1978) commented that "Individual learning is a necessary but insufficient condition for learning organization process" (p.20). Simon (1991) stated that "All learning takes place inside individual human heads: an organization learns only in two ways: (1) by the learning of its members; (2) by ingesting new members who have knowledge the organization didn’t previously have" (p.176). Senge (1990) argued that "Organizations learn only through individuals who learn. Individual learning does not guarantee organizational learning, but without it not organizational learning occurs" (p.236). As Marsick and Watkins (2003) described individual learning as a natural process in which individuals discover discrepancies or challenges in their environment, select strategies based on cognitive and affective understanding of these challenges, implement these strategies and evaluate their effectiveness, and eventually begin the cycle again.

At the individual learning level, "intuiting" is the process of developing new insights. Individual competencies can be specific to a job context, and may not be transferable to another context. There are also generic competencies that have been identified as important for individual learning such as being able to accept negative feedback without becoming defensive (Argyris & Schon, 1978), having an orientation of self development (Pedler et al., 1991), acquiring external knowledge (Bertini & Tomassini, 1996), and having a scanning imperative (Nevis, DiBella, & Gould, 1995).

2.5.2 Group or Team Learning Level

Many scholars considered group learning involves the sharing of individual interpretations to develop a common understanding (Argyris & Schon, 1996; Senge, 1990; Watkins & Marsick, 1993). Senge (1990) stated that "Team learning is vital because teams, not individuals, are the fundamental learning unit in organizations. This is where ‘the rubber meets the road’; unless teams can learn, the organization cannot learn" (p.10). Argyris and Schon (1996) and Watkins and Marsick (1993) described team learning occurs when team members take part in dialogue and exchange of ideas and information. Dialogue has been identified as a key aspect of the integrating process.

At the group or team learning level captures the process of integrating. It includes such elements as efficiency working in groups, has productive meetings, having the right people to address the issues, and encompasses key elements of dialogue including being prepared to share successes and failures, encouraging diversity, and effective conflict resolution.

2.5.3 Organizational Learning Level

The different views regarding the nature of learning at the organizational level, some theorists view the organization as a collection of individuals, while others view it as the systems, structures, and procedures of the organization. For example Crossan, Lane, and White (1999) suggested that the organizational level is more than large-scale shared understanding. It represents the translation of shared understanding into new products, processes, procedures, structures and strategy. It is the non-human artifacts of the organization that endure even though individuals may leave (Bontis, Crossan, & Hulland, 2002). Furthermore, the organizational level captures the elements of strategic alignment. Ultimately, if organizational learning is to provide a sustainable competitive advantage (DeGeus, 1988) it needs to be linked to a competitive premise. Since the competitive landscape is constantly shifting, organizations need the capacity to renew themselves in a strategic sense (Quinn, 1992).

At organizational learning level involves a shared understanding is translated into the organization including products, systems, structures, procedures and strategy. While the concept of organizational learning has remained ubiquitous (Dodgson, 1993), the majority of the relevant studies appear to be in concert in that organizational learning is the product of individual learning (Argyris & Schon, 1978; Dixon, 1994; Kim, 1993). Argyris and Schon (1978) noted that the paradox of organizational learning is that it is not merely individual learning; even through organizations learn through the experience and actions of individuals. Dixon (1994) and Kim (1993) described individual build cognitive maps of their work context, and when these maps are made explicit and shared, individual learning is transferred to the organizational learning level.

2.6 The Dimensions of the Learning Organization Questionnaire (DLOQ)

Watkins and Marsick (1993, 1996) originally defined the learning as an organization characterized by continuous learning for continuous improvement and by the capacity to transform itself. They developed the Dimension of the Learning Organization Questionnaire (DLOQ) an instrument whose seven actions imperatives or dimensions that characterize companies striving to become learning organizations: 1) continuous learning, 2) inquiry and dialogue, 3) team learning, 4) embedded system, 5) system connection, 6) empowerment, and 7) strategic leadership. The initial approach was based on the interactive components of organizational change and development at the all entities of individual, team, and organization (Watkins & Marsick, 1997; Yang, Watkins, & Marsick, 2004). The DLOQ learning organization assessment tool allows members of organizations to examine the extent to which their organizations embrace the practices and beliefs associated with the seven dimensions (Marsick and Watkins, 2003). Marsick and Watkins (2003) argued that climate and cultural aspects are built from complicated components, among them leadership, learning process, and other supportive systematic factors. To be more specific, the DLOQ contains seven dimensions of the positive nature and cultural aspects of a supportive learning organization, which encourage dynamic organizational learning process at two levels: organizational structure and people’s collaborative learning. As for the DLOQ, it integrates both concepts: learning organization and organizational learning. Regarding the sub-dimensions of the DLOQ, continuous learning, system connection, and embedded system are closely associated with contextual mechanism, which leads to learning organization. Dialogue and inquiry, team learning, empowerment, and strategic leadership are more related to organizational process. The original version of the DLOQ consisted of 43 items to measure the seven dimensions; later on, throughout empirical validation of the instrument, Yang (2003) and Yang et al. (2004) refined the DLOQ and fabricated an abbreviated version of it, which consisted of 21 items that did not depreciate the original theoretical structure.

2.7 Conceptualization of Organizational Innovativeness

The concept of organizational innovativeness was initially utilized to describe a process of opportunities when adopted in practice (Schumpeter, 1934; Tidd, Bessant, & Pavitt, 1997). It provides flexibility for firms to choose different options to satisfy their customers on a sustainable basis so that will provide a basis of the survival (Banbury & Mitchell, 1995). Organizational innvativeness becomes an indication of the degree to which an organization is willing to accept and implement innovations.

Organizational innvativeness takes different definitions when used in different contexts. Schumpeter (1934) suggests a range of possible innovative alternatives, namely developing new products or services, developing new methods of production, identifying new markets, discovering new sources of supply, and developing new organizational forms. Levitt (1966) conceptualizes organizational innovativeness based on industrial and business level criteria. He views organizational innovativeness from two points: (1) newness in the sense that something has never been done before, and (2) newness in that something has not been done before by the industry or by the company. Urabe (1988) defined innovativeness as the generation of a new idea and its implementation into a new product, process, or service, leading to the dynamic growth of the national economy and the increase of employment as well as to a creation of pure profit for the innovative business enterprise. Davis, Morris, and Allen (1991) defined innovativeness as "the seeking of creative, unusual, or novel solutions to problems and needs. This includes the development of new products and services, as well as new processes and technologies for performing organizational functions: production, packaging, delivery, sales promotion and administration (p.44). Ali, Krapfel, and Labahn (1995) consider innovativeness as a market based construct and define innovativeness as the uniqueness or novelty of the product to the market. Lumpkin and Dess (1996) view organizational innovativeness as reflecting organizations’ tendency to seek new ideas that can lead to the development of new products.

Many studies have many different indicators or dimensions to measure organizational innovativeness (Anderson & Ortinau, 1988; Capon, Farley, Hulbert, & Lehmann, 1992; Ettlie, Bridges, & O’Keefe, 1984; Hage, 1980; Han, Kim, & Srivastava, 1998; Hurley & Hult, 1998; Lawton & Parasuraman, 1980; Miller & Friesen, 1983; Robertson, 1967; Wang & Ahmed, 2004).

Miller and Friesen (1983) focus on four dimensions: new product or service innovation, methods of production or rendering of services, risk taking by key executives, and seeking unusual and novel solutions.

Ettlie, Bridges, and O’Keefe (1984) and Hage (1980) distinguish between two levels of innovationess: radical and incremental innovations. Radical innovations include products new to the adopting business and departures from existing production patterns. Incremental innovations include adjustments to existing products and production patterns.

Anderson and Ortinau (1988) and Robertson (1967) identify three categories of innovations: continuous innovations, dynamically continuous innovations, and discontinuous innovations. These categories represent different levels of innovativeness. Continuous innovations involve alterations to existing products. Dynamically continuous innovations involve the development of new products without altering existing production patterns. Discontinuous innovations involve the development of new products and new production patterns.

Lawton and Parasuraman (1980) base their scale on two dimensions of innovativeness: (1) the degree of change in the user consumption pattern necessitated by adoption, and (2) the degree of difference between the new product and those already on the market.

Capon, Farley, Hulbert, and Lehmann (1992) adopt three dimensions of organizational innovativeness: market innovativeness, strategic tendency to pioneer, and technological sophistication.

Han, Kim, and Srivastava (1998) assessed organizational innovativeness on the basis of two components: technical and administrative innovation.

Hurley and Hult (1998) introduce two innovation constructs: innovativeness and the capacity to innovate. Innovativeness is the notion of openness to new ideas as an aspect of a firm’s culture. Innovativeness of the culture is a measure of the organization’s orientation toward innovations. The capacity to innovate is the ability of the organization to adopt or implement new ideas, processes, or products successfully.

Wang and Ahmed (2004) examined the development and validation of the organizational innovativeness construct. They are product innovativeness, market innovativeness, process innovativeness, behavioral innovativeness, and strategic innovativeness. Product innovativeness is the novelty and meaningfulness of new products introduced to the market in a timely fashion. Market innovativeness is the newness of approaches that companies adopt to enter and exploit the targeted market. Process innovativeness is imperative in overall innovative capability, in that an organization’s ability to exploit their resources and capabilities, and most importantly, the ability to recombine and reconfigure its resources and capabilities to meet the requirement of creative productions is critical to organizational success. Behavioral innovativeness demonstrated through individuals, teams and management enables the formation of an innovative culture, the overall internal receptivity to new idea and innovation. While, strategic innovativeness highlights an organization’s ability to identify external opportunities in a timely fashion and match external opportunities with internal capabilities in order to deliver innovative products and explore new markets or market sectors.

2.8 Conceptualization of Organizational Performance

The concept of organizational performance is the idea that an organization is the voluntary association of productive assets, including human, physical, and capital resources, for the purpose of achieving a shared purpose (Alchian & Demsetz, 1972; Barney, 2002; Jensen & Meckling, 1976; Simon, 1976). Organizational performance is an indicator which measures how well an enterprise achieves their objectives (Hamon, 2003; Venkatraman & Ramanujam, 1986). An organization can assess organizational performance according to the efficiency and effectiveness of goal achievement (Robbins & Coulter, 2002). Organizational performance and effectiveness are synonyms which are interchangeable (Anderson, 2006; Hancott, 2005; Montanari, Morgan, & Bracker, 1990). Anderson (2006) states that the concept of effectiveness is a ratio, implying that two entities are required when defining and measuring effectiveness. He also regards effectiveness as the degree of the achievement of profitability goals. Hancott (2005) points out that a number of indicators have been adopted to measure organizational performance since mid-1900, such as profit growth rate, net or total asset growth rate, return on sales, shareholder return, growth in market share, number of new products, return on net asset, etc. Montanari, Morgan, and Bracker (1990) also suggested that organizational effectiveness may be measured in terms of financial measures, operational measures as well as behavioral measures. First, the authors noted that the financial measures such as profitability and growth can be used to access the financial performance of an organization. Second, the operational measures such as productivity, resource acquisition, efficiency and employee reaction can be adopted to assess the effectiveness of the workflow as well as work support in organizations. Third, behavioral effectiveness measures such as adaptability, satisfaction, absence of strain, development and open communication can be adopted to determine individual performance.

Many scholars emphasize different internal measures when they focus on the extent to which an organization reaches its goals as the key criterion of performance (Etzioni, 1964; Pfeffer, 1982; Price, 1972) and develop portraits of organizational performance, such as various measures of organizational health (Argyris, 1964; Bennis, 1966; Likert, 1967). Still other scholars focus on external factors in developing criteria of performance, emphasizing the relationship of an organization to its environment (Seashore & Yuchtman, 1967; Schermerhorn, Hunt, Jr, & Osborn, 2002). Seashore and Yuchtman (1967) defines organizational performance through the overall survival of the organization, "the ability to exploit its environment in the acquisition of scarce and valued resources to sustain its functioning". Schermerhorn, Hunt, Jr, and Osborn (2002) point out that performance refers to the quality and quantity of individual or group work achievement.

The measurement of organizational performance is associated with the financial and non-financial measures. The financial measures return on investment (ROI), profit, growth (Smith, Bracker & Miner, 1987) and returns sales (Chong, 2008). In this context, Bucklin and Sengupta (1993) claim that financial measures of performance, such as sales and profit, may not clearly reflect the quality of the SMEs’ performance. Chong (2008) assessment of the performance should be made in a complementary way, by analyzing its effect on the non-financial measures by the SMEs, such as number of employees (Davidsson, 1991; Loscocco & Leicht, 1993; Mohr & Spekman, 1994; Orser, Hogarth-Scott, & Riding, 2000; Robinson & Sexton, 1994; O’Farell, 1986; Orser, Hogarth-Scott, & Riding, 2000), growth in market share (O’Farell, 1986), growth in revenue across time (Miller, Willson, & Adams, 1988), revenue per employee (Johannisson, 1993), customer’s satisfaction (Leseure, Shaw, & Chapman, 2001), market share (Bouchikhi, 1993; O’Farell, 1986), and revenue per employee (Johannisson, 1993). These measures need to be reviewed and updated regularly ensuring that they remain suitable for the changing environments, competition, availability of resources (McGee, Dowling, & Megginson, 1995), meeting the stakeholders’ needs and expectations (Srinivasan, Woo, & Cooper, 1994), and fit into internal planning and target setting (Merz & Sauber, 1995).

Many studies have applied different ways to measure organizational performance (Huselid, Jackson, & Schuler, 1997; Keskin, 2006; Lee & Lee, 2007; Lee & Tsai, 2005; Lin, 2006; Lin & Kuo, 2007; Majid, 2011; Ruzzier, Hisrich, & Antoncic, 2006). Keskin (2006) used a multi-company and multi-industry sample, an attempt was made to control for performance differences in the nature of firms by using relative performance measures, such as market share, growth rate, and profitability. Lee and Lee (2007) suggest that organizational performance measures can be categorized into four sections: financial measures, intellectual capital, tangible and intangible benefits, and a balanced scorecard. Some literature proposes the usage of human performance factors, which includes employee retention and motivation, and also market performance,which includes profit margins, sales, and customer satisfaction (Huselid, Jackson, & Schuler, 1997; Lin & Kuo, 2007). Lee and Tsai (2005) used 11 variables to measure business performance, such as (1) new product cycle time; (2) new product success rate; (3) degree of product differentiation; (4) first to market with new application; (5) new product introduction rate; (6) customer satisfaction; (7) return on investment; (8) sales growth; (9) market share; (10) market share growth; and (11) profitability. Lin (2006) used the constructs to define organizational performance, refers to the degree to which an organization, in terms of its ability, acquires and efficiently uses its available resources to achieve specific goals. Furthermore, the researcher focuses on organizational members’ perception of the overall performance at the organizational level and is considered as an indicator of how well organization is doing according to such criteria as efficiency, organizational flexibility, and adaptability. Majid (2011) measures SME performance on the perceptions of owner/managers in terms of improvements in market share, profitability, sales growth, return on performance and overall performance. Meanwhile, Ruzzier, Hisrich, and Antoncic (2006) in their study of SME internationalization proposed both sales growth and profitability as the performance indicators. Generally, performance is a measurement or indicator for evaluation or assessment of individuals, group, firm and organizations. It reveals the strength and weakness of what one wants to measure (Lucky, 2011).

2.9 Empirical Studies on Learning Organization and Organizational Performance

This section is devoted to a review of the learning organization literature by reporting empirical studies using the Dimensions of the Learning Organization Questionnaire (DLOQ) and organizational performance from many researchers from many countries (McHargue, 1999; Ellinger, Ellinger, Yang, & Howton, 2002; Yang, 2003; Yang et al., 2004; Davis, 2005; Kumar & Idris, 2006; Chajnacki, 2007; Herrera, 2007; Wang & Yang, 2007; Lien, Hung, Yang, & Li, 2008; Song, 2008; Demers, 2009; Tseng, 2010; Weldy & Gillis, 2010; Akhtar, Arif, Rubi, & Naveed, 2011; Awasthy & Gupta, 2011).

McHargue (1999) investigated the relationship between each dimension of the learning organization and financial performance, knowledge performance, and mission performance in the nonprofit sector. The samples surveyed 264 private human service organizations throughout the United States. CEOs were asked to complete the DLOQ to measure seven learning organization behaviors necessary for a learning organization. The researcher used a DLOQ scale which was based on 43 items scale developed from Watkins and Marsick (1997) to identify the learning organization behavior. The results found that all of the seven dimensions of the learning organization were significantly related to financial performance, knowledge performance, and mission performance. Systems to capture learning showed the strongest relationship with financial performance and knowledge performance, while inquiry and dialogue showed the weakest relationship with financial performance, knowledge performance, and mission performance. In addition, continuous learning showed the strongest relationship with mission performance.

Ellinger, Ellinger, Yang, and Howton (2002) examined the overall effects of the learning organization concept of financial performance. This study surveyed 208 logistics managers for profit-organizations in the United State; industries include manufacturers in electronics, chemicals, retail, automotive parts, food, and paper. The performance measures contained both subjective measures using return on investment, average productivity per employee, response time for customer complaints, and cost per business transaction and objective measures using return on equity, return on assets, Tobin’s q, and market value added. Financial data was for one year – 1998. This study used the DLOQ instrument with 43 and 21 items to assess the extent to which the organization's practice behaviors that are believed to be characteristic of a learning organization. Empirical findings investigated that there was a positive association between learning organization practices and firm’s financial performance both subjective and objective. The researchers indicated that more than 10 percent of the variance in the four financial performance indicators could be explained by the DLOQ dimensions.

Yang (2003) proposed that the concept of a learning culture can be adequately measured and validated by relating it to organizational performance. The researcher examined the dimensionality of the constructs of learning culture and to identify the measurement domain, a nonrandom sample of 836 participants from multiple organizations was used. The result found that half of the original items (43 items) were deleted from the scale, and the remaining 21 items constituted an abbreviated form of the instrument. The refined measures have been found to form an adequate measurement model. In another related study, Yang, Watkins, and Marsick (2004) investigated the constructs of the learning organization by examining the interrelations among the dimensions and examining the relationship between learning characteristics of organizations and organizational performance. The learning organization consisted of seven dimensions of the DLOQ. Organizational performance was measured by subjective: financial performance and knowledge performance. A total of 836 samples consisted of a nonrandom sample from multiple organizations: service, manufacturing and public organizations in the United States. This study refined the DLOQ and fabricated an abbreviated version of it, which consisted of 21 items that did not depreciate the original version of the DLOQ consisted of 43 items to measure the seven dimensions. The findings found that continuous learning, dialogue and inquiry, team learning, and empowerment had indirect significant effects on organizational outcomes. System connection, embedded system, and provide leadership for learning are to serve as mediators. Although provide leadership for learning was the only variable that had a direct influence on financial performance, embedded system and system connection affected financial performance indirectly through knowledge performance. Furthermore, the author indicated that 66 percent and 74 percent of the variance of the perceived two organizational performance variables namely financial performance and knowledge performance respectively. Evidence suggests that correlations between learning culture with perceived subjective measures of organizational performance tend to be higher than with objective outcome measures (Ellinger et al., 2002). In addition, evidence also suggests that the abbreviated version of the DLOQ has been assimilated as an instrument applicable to measure the concept of the learning organization and its relationship to organizational outcomes. DLOQ offers valuable and practical strategies for organizational researchers and practitioners who will work to create learning organizations.

Davis (2005) explored the relationship between learning organization and organizational performance. This study was a correlation design, with the organization as the unit of analysis. The degree of learning orientation (overall, and of its sub-constructs) of each organization was related to its corresponding performance as measured by financial performance and knowledge performance. The sample of 2,000 firms was obtained by identifying the marketing function and the human resources function heads of a random sample in the United States. The results found that multiple regression equation for the performance variables: financial performance, knowledge performance were determined to be significant. The researcher defined DLOQ assesses systemic and cultural characteristics of the firm rather individual training programs or organizational development intervention, and can help firms assess to what degree they have or have not achieved the state of being a learning organization.

Kumar and Idris (2006) studied the relationship between learning organization dimensions, institutional characteristics, and knowledge performance. There were 238 samples used in the private colleges of Malaysia. This study tested the DLOQ instrument and subjective performance. The results confirmed that there is a positive and significant relationship between the seven dimensions of the DLOQ and perceived knowledge performance. The three dimensions that demonstrated strong relationships were team learning, embedded learning systems, and strategic leadership. The institutional characteristics that jointly affected knowledge performance were perceived levels of commitment to professional services and commitment to effective teaching.

Chajnacki (2007) examined the relationship between characteristics of a learning organization and multi-dimensional organizational performance. The researcher used a DLOQ scale which was based on 21 items scale developed from Marsick and Watkins (2003). There were 259 executives and human resource managers within large, publicly-owned companies with headquarters or divisions located in Pennsylvania. Although the learning organization has been a frequently studied topic, there have been few empirical studies which have examined its relationship with organizational performance, especially performance which includes hard financial data. The survey instrument used to assess this relationship was the DLOQ along with both subjective and objective performance: operational, knowledge, financial performance. Hard financial performance metrics included gross profit margin, return-on-asset, and return-on-equity results for each target company over a period of 9 months preceding the survey distribution. Six research questions yielded various levels of results. The most frequently observed learning dimensions included continuous learning, community connections, and strategic leadership. The findings indicated significant differences based on both company size and industry sector. Team learning, learning systems, and culture of empowerment were most prevalent in small companies. Continuous learning, inquiry and dialogue, connection to the community, and strategic leadership were most prevalent in the middle company category. The results of this study can assist companies in establishing a sound business case for investments in learning programs, corporate training initiatives and reinforcing long-term rewards that can be realized by establishing and maintain the key dimensions of the learning organization model.

Herrera (2007) examined linking the constructs of the learning organization with performance improvement. The degree of learning orientation, both overall and by individual elements of the learning construct, were also compared to self-reported financial performance and knowledge performance. The DLOQ constructed to measure the seven learning organization dimensions and organizational characteristics regarding financial performance and knowledge performance (e.g., continuous learning; dialogue & inquiry; team learning; empowerment; system connection; embedded system; provide leadership). The researcher used a DLOQ scale which was based on 43 items scale developed from Yang, Watkins and Marsick (2004). Respondents were asked to indicate their perception of the degree to which their organization practiced the described behaviors. The 275 samples consisted of all executives, management, and operational/administrative employees within the record company. The units of measurement were grouped into three levels: small, medium, and large within the record company industry: Indie: unit sales under 500,000, Major Indie: unit sales over 500,000, Major: unit sales over 1,000,000. The finding indicated that there were differences in respect to organization size to knowledge performance and financial performance. The largest organization generated the best knowledge performance, but conversely generated the smallest financial performance, while the small and midsize companies generated similarly, and the best, financial performance against knowledge performance. Results indicated that as organizational size increased, the linkage between knowledge performance and financial performance was less correlated and moved apart. This association illustrated that there were strong impediments affecting the transfer of knowledge from the individual to the team that manifest as the organization grows. This was evident by the largest organization exhibiting the highest knowledge performance value in conjunction with the poorest financial performance. However, it also indicates that the smaller organizations somehow overcome any inherent disability of the larger organizations later indicated by empowerment, continuous learning, connectedness to the environment and systems to capture learning that are embedded within the smaller organizational size.

Wang and Yang (2007) examined the culture of learning organizations in Chinese state-owned and privately-owned enterprises and the impacts on perceived financial performance mediated by job satisfaction. The data was collected from 919 employees in nine companies located in Guangdong Province of China. The DLOQ developed by Watkins and Marsick (1997) and modified with 21 items (Yang, 2003) was used to guide the evaluation of the culture of learning organizations in Chinese enterprises. The results of structural equation modeling indicated that the culture of learning organizations has a significant impact on employee’s job satisfaction and perceived financial performance. However, employees’ job satisfaction has no significant impact on perceived financial performance.

Lien, Hung, Yang, and Li (2008) investigated the psychometric learning characteristics of a Chinese DLOQ is a valid concept in Taiwan. The researchers used a DLOQ scale which was based on 43 items scale developed from Watkins and Marsick (1997) to identify the learning activities in organizations. The organizational performance criteria were accessed by knowledge performance was defined as enhancement of products and services resulting from learning and knowledge, whereas financial performance was defined as the state of financial health and resources available for growth. This study utilized a convenience sample for data collection. There were five medium-to-large private corporations to participate in this study. The sample comprised of 679 human resource directors of which 340 were from the two finance/insurance companies, and 339 were from the three high-tech companies. The results found that the seven dimensions of a learning organization were significantly related to the two measures of organizational performance. Evidences also revealed that the Chinese DLOQ has the reasonable reliability, and that the seven-dimensional factors (e.g. Continuous learning, inquiry and dialogue, team learning, embedded system, empowerment, system connection, and strategic leadership) structure were appropriate for the Taiwanese context.

Song (2008) studies the learning organization cultural aspects and knowledge creation process as they relate to determinations of the perceived organizational performance improvement in the Korean context. The researcher used a DLOQ scale which was based on 21 items scale developed from Yang, Watkins and Marsick (2004). The 633 samples used in five subsidiary companies, which include insurance, electronics, construction, service, and heavy industrial areas of the Korean private conglomerate. The survey instrument was used with the DLOQ; each of the dimensions has three questions to measure each of the seven dimensions of the learning organization environment. The finding found that the relationship between learning organization cultural, knowledge creation, and organizational performance were determined to be positive and significant relationships. With regard to the perceived organizational performance, the researcher initially intended to measure two different levels of performance financial-related and knowledge-related. However, both independent constructs were found to be more related to knowledge-related performance improvement than to perceived level of the organizational financial performance.

Demers (2009) explored the relationship between a firm’s implementation of learning organization dimensions or characteristics and organizational performance. Organizational performance measured two profitability ratios (i.e. Return on assets and return on sales). Financial data for these two ratios were collected over an eleven year period, from 1995 to 2005. The researcher used a DLOQ scale which was based on 43 items scale developed from Marsick and Watkins (2003). The sample surveyed 80 manager firms from the public pharmaceutical companies in the United State. Results indicated that the size of the firm, as measured by the number of employees, was not a significant factor for organizational performance. Therefore, the firms were not categorized by size. However, the researcher gave credence to the notion that a firm’s adoption and implementation of ‘learning organization’ characteristics or dimensions is a means of continuous improvement in performance.

Tseng (2010) observed the relationship between learning organization practices, organizational commitment and organizational effectiveness. The study was done in the context of SMEs (incubating start-up small and medium-sized enterprises and awarded outstanding small and medium-sized enterprises) in Taiwan. The researcher used a DLOQ scale which was based on 21 items scale developed from Watkins and Marsick (1999, 2003) to identify the learning organization practices in organizations. A sample of 300 SMEs were investigated. The survey used the DLOQ which was reduced to seven factors to examine the impact of learning organization practices on SMEs’ organizational commitment and effectiveness. The scale measuring learning organization practices showed appropriate fit between the proposed measurement model and the data. The results found that learning organization practices have a positive effect on organizational commitment. Learning organization practices have a positive effect on organizational effectiveness and also organizational commitment has a positive relationship with organizational effectiveness. Given these good results, this study found that the scales of learning organization practices, organizational commitment, and organizational effectiveness provide very good supporting evidence of construct validity.

Weldy and Gillis (2010) examined the perceptions of managers, supervisors, and employees from different organizations relevant to the seven dimensions of a learning organization and the two dimensions of knowledge and financial performance. The sample surveyed 143 organizational members from seven local organizations (medium-to-large manufacturing and service firms). In their study, the dimensions of the learning organization used the DLOQ scale based on 43 items developed by Watkins and Marsick (1997). The results indicated significant effects for the level of learning organization dimensions and the two performance dimensions. Moreover, evidences also revealed significant differences across learning dimension levels (empowerment and system connection), and across organizations for six of the learning dimensions including all except continuous learning. The performance dimensions showed managers higher than supervisors and employees on financial performance, and managers higher than employees on knowledge performance.

Akhtar, Arif, Rubi, and Naveed (2011) investigated the impact of organizational learning on organizational performance of higher education institutes in Pakistan. The sample surveyed 150 respondents from faculty and administrative staff. In their study, the dimensions of the organizational learning were used the DLOQ scale which was based on 21 items developed by Yang, Watkins, and Marsick (2004). The results indicated that continuous learning, team learning, embedded system, empowerment, and strategic leadership have no significant impact on organizational performance. There are two dimensions (inquiry and dialogue and system connection), that have a positive and significant impact on organizational performance. Besides, empirical evidences indicated that organizational learning has a significant impact on organizational performance when moderated by organizational culture . Therefore, the need to retain highly motivated staff is more important for higher educational institutes as they are the provider of learning opportunities.

Awasthy and Gupta (2011) studied the learning orientation in manufacturing and service firms in India. Their study adopted the smaller forms of DLOQ with 21 items developed by Yang (2003) to determine the theoretical relationships of the learning culture and performance variables (financial and knowledge performance). Convenience sampling was collected from 235 executives working in domestic private, MNCs and public sector organization operating in India-NCR. The results indicated that overall structural level dimensions (embedded system, system connection, strategic leadership, and empowerment) have a significant and greater impact on financial and knowledge performance outcomes in both the manufacturing and service sectors. But the people level dimensions (continuous learning, inquiry and dialogue, and team learning) were more likely to influence learning orientation in the service sectors as compared to the manufacturing sectors. In addition, empirical evidences indicated that the manufacturing sector emphasizes greater on the significant role of systems, effective information collection, storage mechanisms, leadership, continuous learning, shared vision, and team dynamics. On the other hand, service sector supports the importance of individual and group issues.

Table 2.2

Summary of Literature on Learning Organization and Organizational Performance

Author/Year

Respondents

Independent Variables

Dependent Variables

Mediator/Moderator

Findings

McHargue (1999)

264 CEOs from nonprofit organizations in the United State.

-Continuous learning

-Inquiry and dialogue

-Team learning

-System to capture learning

-Empowerment

-Connect to the environment

-Leadership for learning

-Financial performance

-Knowledge performance

-Mission performance

-

-CL -> FP, KP, MP (+/S)

-ID -> FP, KP, MP (+/S)

-TL -> FP, KP, MP(+/S)

-System to capture learning -> FP, KP, MP (+/S)

-EM -> FP, KP, MP (+/S)

-Connect to the environment -> FP, KP, MP (+/S)

-Leadership for learning-> FP, KP, MP (+/S)

Ellinger, Ellinger,Yang, and Howton (2002)

208 logistics managers in US.

DLOQ:

-Continuous learning

-Inquiry and dialogue

-Team learning

-Embedded system

-Empowerment

-System connection

-Strategic leadership

-Financial performance

-

- LO -> FP (+/S)

Yang (2003) and Yang, Watkins, and Marsick (2004)

836 multiple organizations: service, manufacturing and public organizations in US.

-Continuous learning

-Inquiry and dialogue

-Team learning

-Empowerment

-Financial performance

-Knowledge performance

-Embedded system

-System connection

-Strategic leadership

-CL, ID, TL, EM (indirect) -> FP, KP (+/S)

-ES (indirect)-> FP, KP (+/S)

-SC -> KP (+/S), SC (indirect) -> FP (+/S)

-SL ->FP (+/S), SL (indirect) -> KP (+/S)

Note. (+)=Positive; S=Significant; CL=Continuous Learning; ID=Inquiry and Dialogue; TL=Team Learning; ES=Embedded System; EM=Empowerment; SC=System Connection; SL=Strategic Leadership; FP=Fiinancial Performance; KP=Knowledge performance; MP=Mission performance.

Table 2.2 (Continued)

Summary of Literature on Learning Organization and Organizational Performance

Author/Year

Respondents

Independent Variables

Dependent Variables

Mediator/Moderator

Findings

Davis (2005)

2,000 firms in US.

DLOQ:

-Continuous learning

-Inquiry and dialogue

-Team learning

-Embedded system

-Empowerment

-System connection

-Strategic leadership

-Organizational performance

-

- LO -> OP (+/S)

Kumer and Idris (2006)

238 from private colleges in Malaysia

DLOQ

-Continuous learning

-Inquiry and dialogue

-Team learning

-Embedded system

-Empowerment

-System connection

-Strategic leadership

-Knowledge performance

-

- LO -> KP (+/S)

Chajnacki (2007)

259 from large, publicly-owned companies in US.

DLOQ:

-Continuous learning

-Inquiry and dialogue

-Team learning

-Embedded system

-Empowerment

-System connection

-Strategic leadership

-Organizational performance

-

- LO -> OP (+/S)

Note. (+)=Positive; S=Significant; DLOQ=The Dimension of Learning Organization Questionnaire; LO=Learning Organization; OP=Organizational Performance; KP=Knowledge performance.

Table 2.2 (Continued)

Summary of Literature on Learning Organization and Organizational Performance

Author/Year

Respondents

Independent Variables

Dependent Variables

Mediator/Moderator

Findings

Herrera (2007)

275 small, medium, and large levels in the record company

DLOQ:

-Continuous learning

-Inquiry and dialogue

-Team learning

-Embedded system

-Empowerment

-System connection

-Strategic leadership

-Organizational performance

-

- LO -> OP (+/S)

Wang and Yang (2007)

919 employees in nine companies in China

DLOQ:

-Continuous learning

-Inquiry and dialogue

-Team learning

-Embedded system

-Empowerment

-System connection

-Strategic leadership

-Financial performance

-Job satisfaction

- LO -> FP (+/S)

-Job satisfaction -> FP (+/NS)

Lien, Hung, Yang, and Li (2008)

679 HR directors from

five medium-to-large private corporations

DLOQ:

-Continuous learning

-Inquiry and dialogue

-Team learning

-Embedded system

-Empowerment

-System connection

-Strategic leadership

-Organizational performance

-

-LO -> OP (+/S)

Note. (+)=Positive; S=Significant; NS= No Significant; DLOQ=The Dimension of Learning Organization Questionnaire; LO=Learning Organization; FP=Financial performance; OP=Organizational Performance.

Table 2.2 (Continued)

Summary of Literature on Learning Organization and Organizational Performance

Author/Year

Respondents

Independent Variables

Dependent Variables

Mediator/Moderator

Findings

Song (2008)

633 from five companies in Korea.

DLOQ:

-Continuous learning

-Inquiry and dialogue

-Team learning

-Embedded system

-Empowerment

-System connection

-Strategic leadership

-Organizational performance improvement

-Knowledge creation

- LO -> OP (+/S)

- LO -> Knowledge creation (+/S)

-Knowledge creation -> OP (+/S)

Demers (2009)

80 manager firms from the public pharmaceutical companies in US.

DLOQ:

-Continuous learning

-Inquiry and dialogue

-Team learning

-Embedded system

-Empowerment

-System connection

-Strategic leadership

-Organizational performance

-

- LO -> OP (+/S)

Tseng (2010)

300 SMEs in Taiwan

DLOQ:

-Continuous learning

-Inquiry and dialogue

-Team learning

-Embedded system

-Empowerment

-System connection

-Strategic leadership

-Organizational effectiveness

Organizational commitment

- LO -> Organizational effectiveness (+/S)

- LO -> Organizational commitment (+/S)

-Organizational commitment -> Organizational effectiveness (+/S)

Note. (+)=Positive; S=Significant; DLOQ=The Dimension of Learning Organization Questionnaire; LO=Learning Organization; OP=Organizational Performance.

Table 2.2 (Continued)

Summary of Literature on Learning Organization and Organizational Performance

Author/Year

Respondents

Independent Variables

Dependent Variables

Mediator/Moderator

Findings

Weldy and Gillis (2010)

143 organizational members from seven local organizations (medium-to-large manufacturing and service firms).

DLOQ:

-Continuous learning

-Inquiry and dialogue

-Team learning

-Embedded system

-Empowerment

-System connection

-Strategic leadership

-Organizational performance

-

- LO -> OP (+/S)

Akhtar, Arif, Rubi, and Naveed (2011)

150 respondents from faculty and administrative staff of higher education institutes in Pakistan.

-Organizational learning

-Continuous learning

-Inquiry and dialogue

-Team learning

-Embedded system

-Empowerment

-System connection

-Leadership

-Organizational performance

Organizational culture

-CL -> OP (+/NS)

-ID -> OP (+/S)

-TL -> OP (-/NS)

-ES -> OP (-/NS)

-EM ->OP (+/NS)

-SC ->OP (+/S)

-Leadership->OP (-/NS)

-OL ->organizational culture->OP (+/S)

Awasthy and Gupta (2011)

235 executives working in domestic private, MNCs and public sector organization in India.

People Level

-Continuous learning

-Inquiry and dialogue

-Team learning

Structural Level

-Embedded system

-Empowerment

-System connection

-Strategic leadership

-Financial performance

-Knowledge performance

-

- People Level and Structural Level-> FP (+/S)

- People Level and Structural Level-> -> KP (+/S)

Note. (+)=Positive; (-)=Negative; S=Significant; NS= No Significant; DLOQ=The Dimension of Learning Organization Questionnaire; LO=Learning Organization; CL=Continuous Learning; ID=Inquiry and Dialogue; TL=Team Learning; ES=Embedded System; EM=Empowerment; SC=System Connection; SL=Strategic Leadership; OL=Organizational Learning: FP=Fiinancial Performance; KP=Knowledge performance; OP=Organizational Performance.

Based on Table 2.2, most of studies have tested the relationship between the dimension of learning organization questionnaire (DLOQ) and organizational performance (Davis, 2005; Kumer & Idris, 2006; Chajnacki, 2007; Herrera, 2007; Lien, Hung, Yang, & Li, 2008; Song, 2008; Demers, 2009; Tseng, 2010; Weldy & Gillis, 2010), financial performance (Ellinger et al., 2002; Wang & Yang, 2007), knowledge performance (Kumer & Idris, 2006). There are two studies that have tested the relationship within each dimension of the learning organization questionnaire (DLOQ) and organizational performance (McHargue, 1999; Akhtar et al., 2011). Their findings found inconsistent results in the relationship between the different dimensions of the learning organization and performance. The linkage between continuous learning, empowerment and organizational performance were positive insignificant relationships, while team learning, embedded system, and leadership were negative insignificant relationships (Akhtar et al., 2011). On the other hand, a study by McHargue (1999) found that continuous learning, team learning, system to capture learning, empowerment, and leadership were positive significant relationship with performance. Therefore, the present study needs to investigate the results between the different dimensions of the learning organization and organizational performance.

2.10 Empirical Studies concerning Learning Organization, Organizational Innovativeness and Organizational Performance

This section realizes to the learning organization, organizational innovativeness and organizational performance literature by reporting empirical studies from many researchers from many enterprises such as Small Enterprises (Eshlaghy & Maatofi, 2011), Small and Medium Enterprises (Calantone, Cavusgil, & Zhao, 2002; Hult, Hurley, & Knight, 2004; Keskin, 2006; Lin, 2006; Lin, Peng, & Kao, 2008; Ussahawanitchakit, 2008; Dhamadasa, 2009; Rhee, Park, & Lee, 2010; Salim & Sulaiman, 2011; Suliyanto & Rahab, 2012, and Small-Medium-Large Enterprises (Eris & Ozmen, 2012; Lee & Tsai, 2005; Jimenez-Jimenez, Valle, & Hernandez-Espallardo,2008).

Calantone, Cavusgil, and Zhao (2002) investigated a casual relationship between learning orientation, firm innovation capability, and firm performance. The sample surveyed 187 vice presidents from manufacturing and service SME firms in the United States. The sample was split into two groups based on the mean of organization age. Organizations above the mean were defined as old, and those below the mean were defined as young. The findings found that there is no significant difference between the young and old organizations. The moderating effect of organization age on the relationship between learning orientation and firm innovativeness is supported by the study. The researchers suggested that the effect of learning orientation on firm innovativeness is affected by the length of time the organization has been in business. Older firms are more likely to employ knowledge learned and turn it into innovative activities. Younger firms need to establish an efficient mechanism for rapidly internalizing knowledge. The empirical tests have not revealed a moderating effect of organization age on the relationship between learning and performance. However, learning orientation facilitates the generation of resources and skills essential for firm performance and learning orientation and is central not only for innovation but also for the organization’s other activities.

Hult, Hurley, and Knight. (2004) studied the relationship between market orientation, entrepreneurial orientation, and learning orientation as a key antecedents to innovativeness as well as direct relationships between innovativeness and business performance. The 181 marketing managers of the industrial - based SME firm in the United States were investigated. Three variables of performance were tested, namely growth in sales, profitability, and market share. The results found that innovativeness is positively significant related to business performance. Market orientation, learning orientation, and entrepreneurial orientation are positively significant related to innovativeness. On the other hand, the direct effect of learning orientation on performance is insignificant; suggesting that learning orientation must be mediated by some other construct, such as innovativeness, in order to have an effect on business performance. The researchers stated that learning orientation occurs primarily at the cultural level of the firm when members of an organization acquire knowledge via the learning process, that organization acquires the ability to be innovative.

Lee and Tsai (2005) evaluated the interrelationships between market orientation, learning orientation, business operation mode, innovativeness and business performance. There were 100 samples used in the study for the manufacturing and service small-medium-large firms in Taiwan. The results found that the factors of business operation mode have a dominant impact on a firm’s innovativeness. The moderating effects of business operation mode of the relationship between market orientation, learning orientation, and innovativeness. Furthermore, market orientation, business operation mode, and learning orientation of a firm significantly affects innovativeness, and innovativeness significantly impacts on business performance. The indirect effect of market orientation, learning orientation, business operation mode via innovativeness have significant impact on business performance. The direct effect of market orientation and learning orientation also have significant impact on business performance. The researchers stated that market orientation, learning orientation, and innovativeness have been recognized as major factors of business performance both direct and indirect effects. Therefoure, a firm should not only emphasize on the improvement of market orientation, learning orientation and performance but also the development of its innovativeness including technical innovation, innovation management, and innovative ideas.

Keskin (2006) examined the relationship between market orientation, learning orientation, innovativeness, and firm performance in SMEs. The sample surveyed 157 managers from SMEs operating in Turkey. The result found that market orientation has no significant impact on firm innovativeness and firm performance. Firm innovativeness has a positive significant impact on firm performance in SMEs. Learning orientation has a positive significant influence on firm innovativeness, and also learning orientation mediates the relationship between market orientation and firm innovativeness. Market orientation has a positive significant impact on learning orientation in SMEs. Empirical evidence of this study asserts that learning orientation is an antecedent of firm innovativeness and firm performance. Aggregating and disseminating employees’ and managements’ learning throughout the organization with social and environmental factors, in essence, facilitates the development of a learning organization, which has the ability to improve and use technology effectively; create a more labor efficient organization structure; generate new markets; and become more competitive. Managers should leverage employee learning to a higher-level and advance knowledge management for organizational learning in SMEs.

Lin (2006) studied the relationship among organizational learning culture, absorptive capacity, structural organicity, organizational innovativeness, and organizational effectiveness. Data were collected from 246 SME business organizations in Taiwan. The learning culture was measured by a shorter version of the DLOQ. The results found that organizational learning culture has a positive significant effect on absorptive capacity and structural organicity. Structural organicity has a positive significant effect on organizational innovativeness, while organizational innovativeness has a positive significant effect on organizational effectiveness. In addition, absorptive capacity has a positive significant effect on organizational innovativeness and organizational effectiveness. Empirical evidences showed that organizational learning culture plays a crucial role to enhance organizational innovativeness, which is critical to organizational effectiveness. This study did not test the direct path between organizational learning culture and organizational effectiveness. The researcher stated that organizations rely on learning activities for knowledge and information. Learning culture is affected organizational processes such as their ability to innovate, which subsequently have an effect on performance outcomes.

Jimenez-Jimenez, Valle, and Hernandez-Espallardo (2008) studied the relationships between organizational learning, market orientation, innovation, and performance. Data was collected from 744 CEOs in the manufacturing and service of small-medium-large firms in Spain. The findings found that innovation has a positive and significant impact on performance. Both market orientation and organizational learning have a positive and significant impact on innovation. In addition, market orientation has a negative and no significant impact on performance, while organizational learning has a positive and significant impact on performance. This study also found that there is not a significant difference between the manufacturing and service firms. Researchers stated that organizational learning happens when it is supported by managers and by an appropriate learning infrastructure and culture which enhances creativity, openness to new ideas, experimentation, and constant improvement of individual knowledge, risk-taking behavior or system thinking.

Lin, Peng, and Kao (2008) researched the innovativeness effect of entrepreneurial orientation, market orientation and learning orientation on business performance. The sample surveyed 333 managers from SMEs in Taiwan. The results found that entrepreneurial orientation has a positive significant impact on market orientation and learning orientation, while market orientation positively correlated with learning orientation. Learning orientation has a positive significant impact on innovativeness. Innovativeness has a positive significant impact on business performance. In addition, learning orientation as a mediator between market orietntation and innovativeness has