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Article

What Makes Employees Behave Innovatively? Empirical Evidence from South Korea

by
Sora Lee
and
Jaewon Yoo
*
Department of Entrepreneurship and Small Business, Soongsil University, Seoul 06978, Korea
*
Author to whom correspondence should be addressed.
Sustainability 2021, 13(24), 13819; https://doi.org/10.3390/su132413819
Submission received: 28 September 2021 / Revised: 6 December 2021 / Accepted: 10 December 2021 / Published: 14 December 2021
(This article belongs to the Special Issue Sustainable Employee Management)
Browse Figure
Versions Notes

Abstract

:
Although the value of a supportive organizational strategy has been recognized over time, there is a need to better understand its relationship with employees’ psychological and behavioral responses. This study focuses on employees’ innovative behavior as a result of their perceptions of internal market orientation in the organization. It proposes a sequential process model that examines the impact of internal market orientation on employees’ innovative behavior through the ethical climate, psychological ownership, and employee stewardship toward the organization. Using data collected from 310 employees of small and medium-sized enterprises in various industries in South Korea, a linear sequential relationship among the constructs is confirmed. The findings of this empirical study, therefore, suggest that the ethical climate, psychological ownership, and stewardship mediate the effects of internal market orientation on employees’ innovative behavior. The research thus offers a conceptual framework that shows the sequential process of the effect of internal market orientation on innovative behavior. Further, it shows that the perception of an ethical climate can be influenced by management and can develop an employee’s psychological ownership. Implications for managers and directions for future research are also discussed.

1. Introduction

The importance of innovation for building competitive advantage has stimulated continuing research among researchers and practitioners alike. In particular, intensive competition, a technologically turbulent environment, and globalization have created unprecedented challenges for small and medium-sized enterprises (SMEs). As innovation is underpinned by creative ideas [1], employees who develop, promote, discuss, modify, and ultimately implement ideas [2] are an important asset that enables an organization to succeed in a dynamic business environment [3,4]. Therefore, it is not surprising that promoting innovative behavior by individuals presents an explicit management challenge that both researchers and practitioners are facing.
A variety of factors are important antecedents to individual innovation such as the organizational culture and climate [1], job characteristics [5], and social/group context [6]. A number of theorists have suggested that climate may channel and direct both attention and activities toward innovation [3,7]. However, empirical evidence on the intermediate psychological processes that explain how and why different strategic orientations or organizational contexts affect innovative behavior remains inconclusive and underdeveloped. Although several studies have proposed determinants of innovative behaviors [8,9,10,11], only limited constructs are examined. For example, Lu and Lin (2014) proposed ethical leadership and climate as independent variables [8], but failed to cover the connection between ethical climate and individual attitudes because of limited constructs. On the other hand, Yu et al. (2018) explained the connection between employee-organization relationship and innovative behavior based on social exchange theory [10]. This study covered an employee’s psychological state (trust) and behavior (innovative behavior), but omitted an employee’s attitude between inner state and behavior. Based on SOR framework, external stimuli like environments or culture affect an individual’s psychological state and ultimately induce his/her reaction such as attitude [12]. In addition, it is widely known that attitude precedes behavior.
Therefore, this gap induces two research questions. First, does the psychological process explain how and why external environments like strategic orientations affect innovative behavior in the organizational context? Second, does the mediation effect between strategic orientation and innovative behavior exist?
As for external environments, previous studies suggest the internal market orientation (IMO). It is related to a managerial aspect as well as evokes an individual’s inherent interest and motivation in the workplace. Because employees think of and implement innovative endeavors, identifying how strategic orientation can affect the innovative behaviors of employees has the potential to provide a competitive edge. IMO, namely, the extent to which the company commits to producing value for its employees by effectively managing the relations among employees, supervisors, and management [13], enhances the effectiveness of a company’s strategic response and ultimately its ability to satisfy customers consistently.
Another organizational contextual factor that influences innovative behavior is the ethical climate. Ruppel and Harrington (2000) found that an ethical work climate enhances organizational innovation by raising communication and trust [14]. Thus, an ethical climate can affect an employee’s innovative behavior. Generally, an organizational climate is built by the long-term implementation of managerial practices. However, no research identifies the relationship between IMO and an ethical climate. In this research, the relationship between managerial practice and work climate is discussed.
According to Hackman and Oldham’s (1980) job characteristics model, the mediating role of a critical psychological state (experienced meaningfulness, experienced responsibility for outcomes of work, and employee performance) influences the conceptual linkage between the organizational climate and individual performance [15]. Consistent with their research, psychological ownership (experienced meaningfulness) and stewardship (experienced responsibility for outcomes) are included as forms of the critical psychological state in this study.
Therefore, this study aims to extend our understanding of the antecedent role of IMO for enhancing an organization’s ethical climate and an employee’s psychological ownership. This theoretical framework identifies the significant role of strategic orientation as a means of establishing an ethical climate and building psychological ownership toward the organization.
In addition, this research incorporates a number of variables including the ethical climate and psychological ownership, and tests the significance of these variables for building employee stewardship. Existing studies have concentrated on distinguishing stewardship theory from agency theory [16]. This study, on the other hand, aims to discuss the relationship between antecedent and outcome factors for a deeper understanding of the stewardship construct itself. Specifically, this study aims to examine how environmental factors, IMO, and ethical climate influence employee stewardship through distinct psychological processes and how employees behave as a consequence of the built stewardship. Thus, this study explores how employees can create stewardship and identifies the benefits of building stewardship from the organizational perspective through analyzing the mediation effect.

2. Literature Review and Hypotheses

2.1. Internal Market Orientation and Ethical Climate

Among the many challenges of managing employees, one of the most critical is the management and control of their ethical behavior [17]. Since the introduction of the ethical climate framework [18,19], researchers in business and ethics have displayed lots of interest in the ethical climate. Ethical climate theory explains that the types of ethical climate may vary depending on the organizational structures or environments [19]. Differences in organizational structures and industries in which they belong are expected to result in different levels of ethical climate perceptions among employees. Taking the contextual factors into consideration, several studies have reflected diverse organizational environments and elements that affect perceptions of the ethical climate. Martin and Cullen (2006) suggested three such influential factors, namely the external organizational context, organizational form or structure, and strategic or managerial orientation [20]. Van Sandt et al. (2006) argued that the organization’s strategic orientation helps identify not only the culture of the firm but also the perception of its ethical climate [21]. For example, entrepreneurial orientation [22], stakeholder management style [23], and leadership orientation and moral development [24]. Therefore, managerial orientation or style is purported to influence the ethical climate as well as employees’ internalization of ethical codes [25].
The notion of IMO is a managerial approach that aims to ensure customer satisfaction through the fulfillment of employees’ needs [26]. Sanchez-Hernandez and Miranda (2011) suggested IMO as the managerial philosophy underpinning internal market plans [27]. IMO promotes the need to plan and build effective relationships with a company’s employees and management [28], thus ensuring that the firm’s strategic response to the needs of the internal market becomes more effective than that of externally focused companies [29]. According to researchers [13,30,31], IMO precedes the effective implementation of internal marketing. Top management also plays a pivotal role in shaping organizational goal, value, and orientation. Furthermore, the organization may not be internal market-oriented unless employees receive a clear signal from top management about the importance of responding to employees’ needs.
IMO consists of three behavioral components: intelligence generation, intelligence dissemination, and responsiveness [31,32]. Intelligence generation encompasses formal written and face-to-face information generation, informal information generation, and the segmentation of the internal market [31]. As intelligence generation rises, employees regard their organizations as emphasizing identifying employees’ needs and recognizing that their organizational climate is more ethical and equitable. Intelligence dissemination ensures that information on an employee’s wants and needs is shared and communicated across departments [32]. In firms with high intelligence dissemination, the organizational climate is ethical in that it is shared without constraints across all departments. Responsiveness refers to the job design to meet the wants and needs of employees; incentives in the form of bonuses, salaries, loans, and other allowances; management consideration; and training [31].
Verbeke et al. (1996) argued that the ethical climate is also influenced by the organizational environments and frequent communication among members [33]. Thus, highly responsive organizations have an ethical climate in that they not only pursue their own interests but also actively respond to the needs of employees. Hence,
Hypothesis 1 (H1). 
IMO is positively related to the ethical climate.

2.2. IMO and Psychological Ownership

Psychological ownership is the development of employees’ mental state that encourages bonding throughout the hierarchical levels of an organization [34,35]. While most studies of psychological ownership have theorized and obtained empirical evidence of its impact on work attitudes and behaviors, only a handful have investigated what promotes psychological ownership. The theory posits that self-identity motives lead to psychological ownership to the extent that an individual is familiar with, associates with, and identifies with a target [36].
Ballantyne et al. (1995) suggested the role of internal marketing as motivating and developing customer-oriented employees through the careful development of internal relationships [37]. Zhu et al. (2013) also found that the psychological bond developed between colleagues at work affects psychological ownership [38]. By demonstrating care and concern for the welfare of employees, the organization signals a long-term relationship that creates feelings of personal inclusion for them [39]. Such feelings of inclusion enhance the employee’s relationship closeness with management, further solidifying his or her personal attachment to the targets [40].
One possible way to build psychological ownership is through an individual intimately knowing the target [41], which is related to one of the sub-dimensions (information dissemination) of IMO. As the information an employee possesses about an organization becomes greater and more complete, the deeper is the relationship between him or her and the organization [42]. By acquiring information and being familiar with the organization, employees gain a feeling of ownership [36]. By providing employees with the right to have information about the status of the organization, firms thus enhance their psychological ownership [43]. Rousseau and Shperling (2003) also proposed that the extent to which employees can assess business information such as strategic plans influences their perceptions of being an owner of the organization [35].
These studies represent an important aspect of the organization’s IMO: participation in decision making [44]. Participative decisions deliver psychological value to the employee as well as improve the nature and realism of the tasks management expect him or her to perform. Hence, employees who have psychological ownership exhibit positive attitudes (e.g., responsibility) toward organizations to identify self-existing and self-meaning [45]. Employees involved in the organizational decision-making process think they are closely connected to the organization’s goals and feel they have significant discretion to handle their own job without supervision [46]. Pierce et al. (2001) also found that employees who have control of the organization may experience ownership of the organization [36], thus producing psychological ownership by participating in managerial decision making as well as having opportunities to invest in themselves. Moreover, perceived insider status, which represents employees’ sense of inclusion within their organizations, develops when the combination of socialization practices and benefits signals to employees that they have become an in-group member [47,48]. Hence,
Hypothesis 2 (H2). 
IMO is positively related to psychological ownership.

2.3. Ethical Climate and Psychological Ownership

Existing research has suggested an association between the ethical climate and diverse factors [20]. The outcomes of having an ethical climate contain ethics-related variables as well as workplace-related outcomes occasionally examined in management and organizational research [49]. As subsequent research progresses, however, the need to understand ethical climate theory from a deeper and comprehensive perspective is emerging.
Avey et al. (2012) developed the definition of psychological ownership as the mental state in which individuals feel ownership in the sense of having a personal awareness, thoughts, and beliefs on an object [50]. The target of ownership in the workplace can be either tangible or intangible (i.e., a belief about the target of ownership). Pierce et al. (2001, 2003) stated that a person’s attitude about psychological ownership consists of affective and cognitive factors [36,41]. They theorized and differentiated the meaning of psychological ownership from other constructs in terms of possessiveness and motivation [41].
Renn and Vandenberg (1995), who suggested a conceptual linkage between a supportive organizational climate and employee performance, empirically examined the mediating role of psychological capital in this relation [51]. According to Avey et al. (2012), ethical supervisors more cares about the fairness of employee rights and responsibilities [50]. This type of leader also fosters standards or norms that promote an atmosphere that enhances a sense of belonging among employees [50]. Spreitzer (1995) suggested that employees who are listened to and involved in their work environment are more likely to feel that they are members of the organization and workgroup [52]. Therefore, organizations with a strong ethical climate place importance on caring for the well-being of their employees and taking personal responsibility to meet their expectations more often. In this climate, employees feel valued by their organizations in tackling work-related problems; further, such organizations provide solutions to address employees’ issues, which lead to a higher sense of belonging. Hence,
Hypothesis 3 (H3). 
The ethical climate is positively related to psychological ownership.

2.4. Ethical Climate and Employee Stewardship

The ethical climate of an organization involves normative values and beliefs about moral issues that are shared by its employees [53]. An organization’s ethical climate can affect the employee’s ethical behavior [19,53,54,55]. Deshpande and Joseph (2009) argued that the ethical climate significantly influences the employee’s ethical behavior [56]. Schwepker (2001) contended that ethical rules/policies and reward systems are important factors for building an ethical climate [54]. Schwepker and Hartline (2005) explained that the ethical climate of an organization causes an employee’s ethical standards to align with those expected by the firm [25]. One important evaluative ethical standard that overlaps with the perception of ethical climate is the responsibility [19,57]. Employees desire consistency between their ethical value system and the ethical value held by the firm. Thus, before behaving ethically, employees try to align the value suggested by the organization’s ethical climate with the value created by building individual stewardship toward the firm, which reduces ethical conflict among employees. In other words, organizations with a strong ethical climate are more likely to use modeling and positive reinforcement to encourage employees to perceive organizational support, thereby leading to a higher level of employee responsibility toward the organization. Hence,
Hypothesis 4 (H4). 
The ethical climate is positively related to employee stewardship.

2.5. Psychological Ownership and Employee Stewardship

O’Reilly (2002) found that employees have psychological ownership when they feel they have the responsibility to make decisions that are in the long-term interests of the organization [58]. Avey et al. (2009) built a psychological ownership construct that captures several relevant dimensions (self-efficacy, accountability, belonging, and identity) pertinent to a sense of accountability at work [34]. Indeed, extensive research emphasizes the importance of ownership in human attitudes, motivation, and behavior. Pierce et al. (2001) noted that the feeling of ownership produces a responsibility to the target and a sense of right to have control over what happens to the target [36]. Avey et al. (2012) explained that ethical leaders are more inclined to display and promote accountability among their followers [50]. Thus, employees learn the process of responsibility through direct and indirect experiences (e.g., experiencing an ethical climate).
Stewardship reflects the ongoing sense of obligation or responsibility to others based on the intention to uphold the covenantal relationship [16]. Stewardship theorists assert that the perception of ownership and responsibility underlies employees’ determination to perform because they become vested in work outcomes [59]. In this case, relationships between employees and targets are characterized by a sense of moral responsibility that is not formally imposed but originates from the covenantal relationship between two parties [16,60]. Stewardship is thus a broader concept that reflects employees’ felt ownership of and moral responsibility for the target’s overall welfare.
Stewardship researchers outline psychological ownership and responsibility as the underlying motives that align the interests of different stakeholders. Hernandez (2012) also proposed that psychological ownership fundamentally affects the sacrifice of self-interest. This self-sacrifice refers to giving up one’s own benefits or interests for the benefit of the organization. [16]. This study assumed the emotional bond between the employee and the organization plays a significant role in promoting him or her to feel compelled to commit to the positive outcome of the collective; this sense of obligation is created by the emotional link to the organization. Hence,
Hypothesis 5 (H5). 
Psychological ownership is positively related to employee stewardship.

2.6. Ethical Climate and an Employee’s Innovative Behavior

An employee’s innovative behavior is complex, consisting of both the generation and introduction of new ideas as well as their implementation; this is different from creative behavior (i.e., only generating new ideas) [61,62,63]. Scott and Bruce (1994) and Van de Ven (1986) argued that studies of what motivates or enables individuals’ innovative behavior are critical [1,2]. One of the central problems in the management of innovation is the management of attention [2]. According to the attention theory, the level of attention is related to employees’ innovative behaviors. When a president cares about his/her employees, this kind of behavior forms the corporate cultures and psychological climates. Workers who feel the psychological climates receive a signal about their behavioral expectations and the potential outcomes. As both the psychological and ethical climate are the interpretation of an organization’s situation [64], ethical climate also plays a role as a channel between attention and activities toward innovation [65].
Hosmer (1994) noted that ethical treatment by organizations and managers is linked to trust, commitment, and innovation [66]. Lee et al. (2021) found a positive relationship between a supervisor’s positive feedback and an employee’s innovative behavior [67]. Choi et al. (2013) also argue that a benevolent ethical climate encourages workers to take risk while following ethical codes. In this line, an ethical climate can stimulate innovative behavior [11]. Furthermore, ethical leaders emphasize the impact of the work on others and embed that meaning in the job [68,69], whereas followers perceive more job significance in the work and are more willing to strive to generate new ideas that meet the organization’s goals [8]. Treviño et al. (2003) suggested ethical leadership and climate as determinants of ethical behavior and discovered that both ethical leadership and climate positively influenced ethical behavior [70]. This means that individuals in an organization are more likely to pursue the collective good of the group because that is the leaders’ concern [71,72]. They are also inspired to innovate to realize the organization’s goals. Thus, when employees believe that their organizations have an employee-oriented climate, they are more willing to cultivate, exercise, and leverage their knowledge and ability to innovate at work. Hence,
Hypothesis 6 (H6). 
An ethical climate is positively related to an employee’s innovative behavior.

2.7. Psychological Ownership and an Employee’s Innovative Behavior

The theoretical rationale behind the relation between psychological ownership and innovative behavior is based in part on an individual’s needs being satisfied by the experience of psychological ownership. Pierce and Jussila (2011) suggested that the individual has become intertwined with the organization to which ownership is felt, which then motivates him or her to nurture, advance, and protect the target of ownership [73]. Van Dyne and Pierce (2004) argued that the feeling of ownership causes proactive behavior that aims to protect and enhance the target of ownership [45]. For instance, Pierce et al. (1991, 2001) and Vandewalle et al. (1995) proposed that psychological ownership could be related to extra-role behavior [36,43,74]. These voluntary behaviors include helping coworkers, volunteering for special tasks, and orienting new employees.
Another type of behavior, in-role behavior, is also influenced by psychological ownership. Mayhew et al. (2007) pointed out that psychological ownership encourages employees to perform at higher levels [75]. Ownership instills a sense of pride in employees and acts as a performance motivator [76]. Many researchers have also explained that the success of an organization depends on its members developing a sense of psychological ownership (see Mayhew et al., 2007).
According to Chung and Moon (2011), psychological ownership is positively related to constructive deviant behavior by employees when innovating [77]. Such behavior helps the organization by implementing innovative ways of performing daily procedures and developing creative solutions to organizational problems [78]. Thus, employees who experience a greater feeling of ownership toward an organization presumably display more effort and energy to develop, adopt, and implement new ideas for products and work methods. Hence,
Hypothesis 7 (H7).
Psychological ownership is positively related to an employee’s innovative behavior.

2.8. Employee Stewardship and Innovative Behavior

According to Davis et al.’s (1997) stewardship theory, stewards act in the best interests of principals and as “owners,” employees are likely to engage in behaviors that are pro-organizational and collectivistic rather than individualistic and self-serving as well as seek to attain organizational objectives such as growth and profitability [79]; in other words, their behaviors center on the organization. Furthermore, when a firm favors stewardship theory principles, employee and organizational interests align and organizational structures become involvement-oriented and empowering. As a result, firms that support a stewardship philosophy adopt innovative and proactive behaviors that involve calculated risks but can also significantly improve firm performance [80]. Kuppelwieser (2011) also explained that the intrinsic motivation of the steward is one of the most important sources of innovation [81,82,83]. Thus, employees with organizational stewardship are oriented toward benefiting and servicing their organization and try to improve organizational performance by enhancing innovative behavior. Hence,
Hypothesis 8 (H8). 
Employee stewardship is positively related to an employee’s innovative behavior.

3. Research Methods

3.1. Data Collection and Sample

Since common method variance (CMV) is a recently highly mentioned topic today, we have tried to control it from the survey design stage to statistical analysis. First, following the suggestion of Mackenzie and Podsakoff (2012), the authors explained the importance of questionnaires and the impact of survey results on the organization or industry to respondents. In addition, we stated construct validity to eliminate substantial method effects based on Conway and Lance (2010) (see Table 1). SMEs operate under tight time and cost constraints and thus need to be active and risk-taking to improve chances of survival. In this context, an employee’s innovative behavior, which is not easily acquired in a weak institutional environment, is essential to the survival of SMEs in a turbulent environment. Thus, the data used in this study were collected from 310 employees from SMEs in the manufacturing and services industries in South Korea. Since the researchers did not have access to an accurate population listing of South Korean SMEs because of data availability constraints, snowball sampling was adopted as the analytical approach. Most participating companies were located in an advanced equipment manufacturing cluster in the central part of South Korea and produced technological products and services. The sample consisted of 219 men and 91 women; the age of 30 years consisted of 37.2% and 40 years in next (26%). Furthermore, 74.5% of employees are employed in companies with less than 100 employees.

3.2. Measures

All the constructs used in this study were operationalized with well-established measurements drawn from the literature. Following the translation/back-translation procedure, scales originally developed in English were used for South Korean employees.
In this research, the researchers adopted the definition of IMO from Narver and Slater (1990)’s perspective, which describes it as organizational culture. To measure IMO, the 16-item scales consisting of four sub-dimensions (formal information generation, informal information generation, dissemination of information, and response to information) developed by Tortosa et al. (2009) were used [84]. This measurement captured the perceptions of employees and measured the adoption of IMO by managers. Specifically, this scale differentiated the obtaining of information into formal generation dimension (three items) and informal generation dimension (four items). Further, the dissemination of information was measured with four items and response to information was measured with three items.
According to Schwepker’s (2001) research, the authors defined the ethical climate as employees’ perceptions of the practices, procedures, norms, and values that govern ethical decision making in their organizations in this paper [54,85]. Using seven-item Likert scales, employees evaluated the presence and enforcement of codes of ethics, corporate policies on ethics, and top management actions related to ethics.
Psychological ownership was measured with the scale developed by Van Dyne and Pierce (2004), who emphasized possession as the basis of attitudinal measures of psychological ownership [45]. Pierce defined psychological ownership as a perception that an individual or group possesses an object. This perspective is adopted in this paper. Using seven items, this scale measured employees’ feelings about the organization in which they work.
Employee stewardship was adopted and revised from the general stewardship scale of De Ruyter et al. (2009) [86]. Five items were used to measure employee stewardship, defined as social responsibility for self-interest toward the organization.
The innovative behavior of employees is defined as intentional outcomes, such as creating, developing, and applying new ideas for the benefit of the organization. It was rated using Janssen’s (2004) nine-item measure of innovative behavior (idea generation: three items; idea promotion: three items; ideal realization: three items) [87]. Employees indicated how often they performed innovative activities, including creating new ideas for difficult issues (idea generation), mobilizing support for innovative ideas (idea promotion), and transforming innovative ideas into useful applications (idea realization). The response format was a seven-point scale ranging from never (1) to always (7).

4. Research Analysis and Results

Table 1 presents the means, standard deviation, and correlations, showing that all five constructs were positively and significantly related. Next, to alleviate common method variance (CMV) problem, Harman’s single-factor test was conducted. This test indicated highly unsatisfactory fit (Chi-square (df) = 4275.13 (299), relative fit index (RFI) = 0.87; comparative fit index (CFI) = 0.89, normed fit index (NFI) = 0.88, incremental fit index (IFI) = 0.89, root mean square error of approximation (RMSEA) = 0.24), showing that CMV was not a major problem in the observed indicators. In the consideration of limited detection of Harman’s test [88], however, the marker variable method was also done to estimate the effect of CMV on the correlation among variables. Respondent identification number was selected as the marker variable to control for CMV (rM = 0.05, p = 0.39). The mean change in the correlation of the five key constructs after partialling out the effect of rM was 0.02, providing no evidence of CMV.
The measurement properties and hypotheses were evaluated using the two-step approach of structural equation modeling with LISREL 8.53. The reliabilities of the individual measurement scales were assessed using Cronbach’s coefficient α and Fornell and Larcker’s (1981) composite reliability formula [89]. As shown in <Figure 1>, this study examined five latent factors and checked the measurement model using thirty-five reflective indicators. According to Fornell and Larker (1981), when the average variance extracted (AVE) value is greater than the squared value of the correlation coefficient, construct validity has been established. Table 1 shows how this research model satisfies the condition. In addition, we compared the hypothesized model to alternative models to deal with validity problems. The hypothesized model shows better fit indices than the other models (see Table 2), which means convergent and discriminant validity are established.
The first step in the analysis was to test the hypothesized relationships and evaluate the reliability and discriminant validity of the constructs. To do this, five-construct confirmatory factor analyses were estimated using the covariance matrix as the input. Table 3 reports the factor loadings, Cronbach’s alpha, composite reliability (C/R), and AVE estimates. To improve the model fit, five items that showed low squared multiple correlations were omitted.
After removing poor loading items, the final confirmatory factor analysis model fit the data well (Chi-square (df) = 960.27 (289), NFI = 0.97, CFI = 0.98, RFI = 0.97, IFI = 0.98, and RMSEA = 0.063). In addition, the factor loadings shown in Table 3 were all statistically significant at the 0.01 level. The lowest standardized factor loading was 0.75, which means all the loadings were well above the recommended level of 0.50 (Table 3). Based on the recommendation by Hu and Bentler (1999), goodness-of-fit indices such as CFI and RMSEA were selected. We contended that those measures achieve a good balance between Type I and Type II error rates when assessing model fit [90]. According to their Monte Carlo simulations, a CFI greater than or equal to 0.95 and an RMSEA less than or equal to 0.06 are indicative of a good fitting model and these requirements were met by the hypothesized confirmatory factor analysis model.
With LISREL 8.53, a structural equation modeling, a proposed research model was examined [91]. Table 4 shows the structural estimates of this model. As shown, the analyses provide support for most of the hypothesized relationships. The overall fit of this model was good with Chi-square (df) = 965.17 (291), RMSEA = 0.063, CFI = 0.98, and NFI = 0.97. The model was evaluated by estimating the parameter coefficients for the hypothesized links. Each hypothesis test result is discussed next.
Table 4 shows the direct and positive effect of IMO on the ethical climate (β = 0.74, s.e. = 0.05, p < 0.01) and psychological ownership (β = 0.47, s.e. = 0.07, p < 0.01). Thus, Hypotheses 1 and 2 are supported. These findings show that the potential influence of IMO on the ethical climate is stronger than its impact on psychological ownership. Furthermore, the results also show the influential role of IMO in building an employee’s psychological ownership.
Next, the results show the positive and significant relationship (β = 0.21, s.e. = 0.07, p < 0.01) between the ethical climate and psychological ownership; hence, Hypothesis 3 is supported. The result of Hypothesis 3 confirms the crucial mediating role of psychological ownership in the relationship between the ethical climate and employee stewardship.
The results also show the positive relationship between the ethical climate and employee stewardship (β = 0.45, s.e. = 0.05, p < 0.01). As expected, Hypothesis 4 is thus supported. This finding supports the idea of nurturing an ethical climate to encourage employees to show concern and responsibility toward the organization.
In addition, the results show that psychological ownership has a positive influence on employee stewardship (H5: β = 0.40, s.e. = 0.05, p < 0.01). Thus, employees who identify with their organization are motivated to help it succeed and should be empowered to perform their job because this enables them to use their initiative to promote firm success.
Hypothesis 6 pertains to the ethical climate and its influence on an employee’s innovative behavior. The results means that an ethical climate has an positive impact on innovative behavior (β = 0.25, s.e. = 0.05, p < 0.01). Therefore, Hypothesis 6 is supported. This result shows that a more ethical climate fosters strong innovative behavior.
The results also show that psychological ownership has a positive influence on an employee’s innovative behavior (H7: β = 0.24, s.e. = 0.05, p < 0.01). The more individuals feel they own a part of the organization for which they work, the more likely they are to consider behaving innovatively. Pan and Qin (2009) also suggested that psychological ownership can lead to self-involvement and intimacy toward the target organization [92], meaning that employees spend more time and energy on positive organizational behavior such as innovation.
Finally, the effect of employee stewardship on innovative behavior is also positive and significant (β = 0.38, s.e. = 0.06, p < 0.01). Thus, Hypothesis 8 is supported. De Ruyter et al. (2009) found that responsibility norms such as stewardship can function as mediators of the characteristics of the organizational context and performance [93,94]. Consistent with this research, this study found that employees make extra efforts like innovative behavior to benefit their organization, as employees who feel stewardship have a sense of responsibility for the organization’s welfare.
This research examined how employees should respond to management focusing on relationship building between internal customers and organizations. Specifically, it aimed to determine the procedural sequence among IMO, an ethical climate, and psychological ownership. This study also investigated the indirect effects of an ethical climate on employee stewardship through psychological ownership, thereby facilitating an employee’s innovative behavior. Phantom model approach is used to determine the indirect effect. The result shown in Table 5 is achieved based on 200 bootstrap resamples. As we expected each indirect result was supported. This means that when IMO is prevalent in an organization, employees are able to perceive an ethical climate. This influences employees’ psychological ownership and stewardship, which are the explanatory variables of innovation behavior.
We compared a chi-square difference between a hypothesized model and an alternative model using SEM as Moon et al. (2020) did to check the validity [95]. An alternative model ( χ 2 = 961.36 ,   d f = 290 ) , proposing direct effect of internal market orientation on employee stewardship, shows a worse model fit than hypothesized model ( χ 2 = 965.17 ,   d f = 291 ). The chi-square difference between two models is not significant, which means the hypothesized model is more parsimonious.

5. Discussion

5.1. General Results Discussion

This study is a starting point for suggesting IMO as a determinant of the organizational goal of pursuing an ethical climate. As the result showed, the effect of IMO on ethical climate was examined. Consistent with the results of Schminke et al. (2005), this finding explains the importance of strategic orientation as a driving force behind an organization’s ethical climate [24]. Although previous studies of IMO have examined its effect on job-related responses such as organizational commitment, job satisfaction, and trust in management [29], this study focuses on how IMO promotes employees’ understanding of the organization’s strategic goal, which in turn enhances their perceptions of an appropriate ethical climate. Moreover, the results also indicate that IMO fosters employees’ psychological ownership. When management has an IMO, employees perceive more support from the organization and experience control over work processes. In this situation, employees are likely to believe they are entrusted with the responsibility to act in the best interests of the organization.
The authors also suggested the importance of psychological ownership in the relationship between the ethical climate and stewardship. Although psychological ownership can be built by employees’ perceived IMO as a strategic priority, it can also be indirectly developed by the mediating effect of the ethical climate. This finding suggests the constructive role of an ethical climate in establishing employees’ psychological responses.
Furthermore, as a consequence of the ethical climate–psychological ownership relation, employee stewardship toward the organization was suggested as an intervening mechanism for enhancing innovative behavior in this study. Consistent with previous research, critical psychological states are significant mediators of the organizational climate and employee outcomes (organizational commitment and job satisfaction) [51]. Compared with other research topics, stewardship has been underexamined. Specifically, considering the characteristics of the ethical climate, trust, and responsibility, it is important to address and examine the sequence of the theoretical relationships among the ethical climate, psychological ownership, and stewardship.
Fourth, previous research has not focused on stewardship toward organizations and its impact on an employee’s innovative behavior. Yang and Choi (2009) explained that employees are highly responsible as well as willing to take risks and learn from their mistakes, which ultimately enhances their performance [96]. However, they did not consider employees’ innovative behavior to be a way of increasing individual performance. Employee stewardship is a psychological state that may play an important role in motivating various employee behaviors and thus deserves further research focus. On the basis of this research, we might expect stewardship to be strongly influenced by the organizational climate. Although this study showed a significant effect of psychological ownership, having an ethical climate, which is more easily controlled by managers, may be important as well. Therefore, this study extends our understanding of the influential factors and psychological process outcome variables of an ethical culture from the employee perspective.

5.2. Managerial Implications

This study also has precious managerial implications for directors and organizations. First, given the positive influence of IMO on employees’ perceptions of the organizational climate and psychological response, managers should focus not only on the impact of IMO on external marketing but also on the psychological response of those employees who deliver it. IMO is defined as a company’s strategic response and ability to satisfy customers’ needs. In this study, however, the definition of IMO can be extended as it influences internal customers to foster employees’ psychological mind and attitude. When management has an IMO, employees perceive more support from the organization and experience control over work processes. In this situation, employees are likely to believe they are entrusted with the responsibility to act in the best interests of the organization. Thus, this study suggests that directors or managers of an organization should consider the broaden implications of IMO for their employees.
Second, the results of this study support the idea of nurturing an ethical climate to encourage employees to have psychological ownership and feel a sense of responsibility toward the organization. This may not only facilitate employees’ identification with the organization; it can also serve as a mechanism for improving employee stewardship toward the organization. As mentioned earlier, when employees have a sense of ownership toward the organization, they devote their time and energy more to that organization. Such contribution leads to the development of the organization. This is why directors and managers should foster an ethical climate in their workplace.
Furthermore, these results emphasize the pivotal role of employee stewardship in helping employees translate the benefits of an ethical climate and psychological ownership into significant innovative behavior. Although managers should manage employees’ ethical climate and psychological ownership to encourage innovative behavior, developing a sense of stewardship toward the organization could be the more efficient way of driving such behavior. By manipulating the degree of stewardship using human resources management practices such as education, managers may enhance suitable innovative behavior. To ensure that employees are accountable to their organization, it is necessary for managers to first have stewardship for their employees.
Finally, the finding of a significant indirect between the IMO and an employee’s innovative behavior allows us to conclude that organizations should focus on cultivating IMO. As IMO is the determinant of employee stewardship, managers should be aware of the huge impact of IMO on internal customers. This means that IMO allows employees to cherish the organization and to solve and accomplish the organization’s mission and goals creatively. To foster IMO, managers need to periodically remind employees of the goals of the organization. In addition, education should be provided to increase understanding of the market.

5.3. Limitation and Future Research

Even though this study unveiled employees’ psychological processes and suggested determinants of employees’ innovative behavior, the inherent limitation is unavoidable. In this section, major limitations were dealt and viable attempts for future research are presented. First, not only management strategy (IMO), but also various leadership styles or organizational structures should be considered to be determining factors of having an ethical climate and psychological ownership. Therefore, the effect of IMO on other organizational climates such as a justice climate or service climate is suggested to investigate in future studies.
Second, the specific sample chosen for this study was employees of SMEs in South Korea. It is hard to apply these results to all situations due to sampling limitations. For further generalizations, broadening the database is recommended, and testing the viability of our model in other cultural backgrounds would be fruitful. In the future study, extensions into other industries such as high-tech and IT companies, which differ in their degree of ethical climate and an employee’s ethical value congruence, a contingency framework can be applied to show if and how the hypothesized linkages might change.
Third, from our cross-sectional data, no causal relationship among the variables used in this study could be inferred. Although employees exposed to IMO may report more positive attitudes toward the ethical climate, they may perceive more IMO as a result of the firm’s ethical climate. Thus, further investigation is needed to address this issue. Specifically, longitudinal research is recommended for further research.
Finally, all the constructs used in this research were obtained by self-reported data. Although self-reports are appropriate for employee’s perceived attitude or mind, other measures like dyadic or triadic data might be more suitable to measure outcome variables. Hence, future studies are recommended to consider various methods, not only to avoid the CMV problem but also to improve the quality of research.

Author Contributions

Conceptualization, J.Y.; methodology, J.Y. and S.L.; Writing—original draft preparation, J.Y.; writing—review and editing, S.L. All authors have read and agreed to the published version of the manuscript.

Funding

This research received no external funding.

Institutional Review Board Statement

Institutional Review Board Statement: Ethical review and approval were waived for this study because respondents’ anonymous and confidential responses were assured.

Informed Consent Statement

Informed consent was obtained from all subjects involved in the study.

Data Availability Statement

Data available on request due to restrictions.

Acknowledgments

The authors would like to express special thanks to all the members of special issue editors as well as an assistant editor of MDPI for their valuable comments and kind support until the end.

Conflicts of Interest

The authors declare no conflict of interest.

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Sustainability 13 13819 g001 550
Figure 1. Research model.
Figure 1. Research model.
Sustainability 13 13819 g001
Table
Table 1. Descriptive statistics and correlation matrix.
Table 1. Descriptive statistics and correlation matrix.
ConstructMS.D12345
1. IMO4.4341.197(0.772)
2. Ethical climate4.7551.1600.593 **(0.760)
3. Psychological ownership4.4561.4560.511 **0.437 **(0.708)
4. Employee stewardship4.8551.1860.488 **0.528 **0.533 **(0.716)
5. Innovative behavior4.4041.2080.451 **0.516 **0.513 **0.590 **(0.769)
Note. M = means, S.D = stand deviation, the diagonal value indicates average variance extracted (AVE) and ** p < 0.01.
Table
Table 2. Results of factor analysis.
Table 2. Results of factor analysis.
Measurement Models χ 2 df ∆ χ 2 ∆dfCFIRMSEA
M1: Hypothesized model960.27 **289--0.980.083
M2: Four-factor model: Combining EC and IMO 1928.25 **293967.98 **40.970.12
M3: Three-factor model: Combining EC, IMO, and PO2515.28 **2961555.01 **70.940.17
M4: Two-factor model: Combining EC, IMO, PO, and STEW3114.50 **2982154.23 **90.920.19
M5: One-factor model: A single-factor model 4275.13 **2993314.86 **100.890.24
Note. ** p < 0.01; All models were compared with Model 1.
Table
Table 3. Measurement items and confirmatory factor analysis results.
Table 3. Measurement items and confirmatory factor analysis results.
ConstructEstimateC/RCronbach’s AlphaAVE
1. IMO0.85–0.910.9310.9320.772
2. Ethical climate0.75–0.930.9260.9170.760
3. Psychological ownership0.75–0.920.9350.9320.708
4. Employee stewardship0.80–0.870.9260.9300.716
5. Innovative behavior0.82–0.930.9580.9580.769
Table
Table 4. Results of the hypothesized relationships.
Table 4. Results of the hypothesized relationships.
RelationshipEst.t-ValueResult
H1IMO → Ethical climate0.7414.70 **Supported
H2IMO → Psychological ownership0.476.45 **Supported
H3Ethical climate → Psychological ownership0.213.05 **Supported
H4Ethical climate → Employee stewardship0.458.74 **Supported
H5Psychological ownership → Employee stewardship0.407.66 **Supported
H6Ethical climate → Innovative behavior0.254.51 **Supported
H7Psychological ownership → Innovative behavior0.244.47 **Supported
H8Employee stewardship → Innovative behavior0.386.02 **Supported
Note. IMO = internal market orientation, EC = ethical climate, PO = psychological ownership, STEW = employee stewardship, and IB = innovative behavior; completely standardized estimates (Est) are presented and ** significant at p < 0.01.
Table
Table 5. Specific Indirect Effects by AMOS.
Table 5. Specific Indirect Effects by AMOS.
PathBS.Ep95% Confidence Interval
Lower BoundUpper Bound
IMO → EC → IB0.1390.0640.0180.0450.250
IMO → PO → IB0.1410.0500.0010.0760.229
IMO → EC → PO→ IB0.0360.0220.0060.0110.081
IMO → EC → STEW → IB0.1290.0400.0000.0790.208
IMO→PO→STEW→IB0.1030.0420.0010.0520.186
IMO→EC→PO→STEW→IB0.0260.0110.0040.0110.081
Note. S.E = standard error, IMO = Internal market orientation, EC = ethical climate, PO = psychological ownership, STEW = employee stewardship, and IB = innovative behavior.
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Lee, S.; Yoo, J. What Makes Employees Behave Innovatively? Empirical Evidence from South Korea. Sustainability 2021, 13, 13819. https://doi.org/10.3390/su132413819

AMA Style

Lee S, Yoo J. What Makes Employees Behave Innovatively? Empirical Evidence from South Korea. Sustainability. 2021; 13(24):13819. https://doi.org/10.3390/su132413819

Chicago/Turabian Style

Lee, Sora, and Jaewon Yoo. 2021. "What Makes Employees Behave Innovatively? Empirical Evidence from South Korea" Sustainability 13, no. 24: 13819. https://doi.org/10.3390/su132413819

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