The Ideology of Innovation

Undaunted by over a decade of scholarly criticism (e.g. Bebchuk and Fried, 2005; Ghoshal and Moran, 1996), senior American executives have stood firm on their moral beliefs about the free-enterprise system – beliefs that justify extravagant increases in executive compensation despite declining firm competitiveness, and the preservation of corporate profits through outsourcing to low-wage countries, layoffs and reductions in benefits for American workers. Of course, moral positions are built to withstand rational critiques. The current moral foundation was laid in the 1980s when President Reagan and Prime Minister Thatcher successfully wrapped the US and British economies in a cloak of righteousness as part of their efforts to bring down what was often referred to as the ‘godless’ Communist regimes of the Soviet Union and its allies. Given the power of moral beliefs, and the fact that managers’ values reflect broader societal values – a linkage examined in depth in the 1950s and 1960s (Bendix, 1956; Parsons, 1959; Sutton et al., 1956; Weber, 2001; Weber and Parsons, 1968) but mostly ignored in the management literature today – we believe that any attempt to substantially reorient US firms must consider the moral underpinnings of the policies that guide them. A focus on business practices and the managerial values and beliefs underlying them is particularly important, we suggest, because the USA and other advanced countries compete primarily on the basis of knowledge-driven innovation and entrepreneurship (Baumol, 2002; Baumol et al., 2007). Knowledge is shared most freely in organizational settings where trust is anticipated and consistently maintained. Trust, in turn, is created and sustained when equitable treatment is valued and pursued by both the leaders and members of firms. In such settings, the excitement and pleasure of creating value through collaborative innovation is reinforced over time by the equitable sharing of rewards (Miles et al., 2005). It is our contention that the managerial values essential to the creation of conditions such as these have been eroding in the US marketplace for more than two-and-a-half decades, a decline that threatens to weaken the ability of US firms to compete through continuous product and service innovation. Indeed, the relative US position on key indicators of social and economic health has noticeably declined, a phenomenon that began in the midto late 1970s. While the disparity between executive and hourly employee wages is the most dramatic difference between US firms and their international competitors, STRATEGIC ORGANIZATION Vol 5(4): 423–435 DOI: 10.1177/1476127007083350 Copyright ©2007 Sage Publications (Los Angeles, London, New Delhi and Singapore) http://so.sagepub.com