Leaderships impact on innovation : A case study on a small business in software industry

Abstract: The ongoing globalization and the ever changing economic climate put pressure on companies’ innovative capability. The purpose of this thesis is to investigate what role leadership has for enhancing innovation in a small software company in the open innovation dimension. This thesis is a qualitative research of the leadership and organizational impact on innovations. We have interviewed the CEO and two employees in a software company specialized in interface programming on industry computer monitors in .NET and consulting services. The company is Swedish and there are currently ten employees working in the business. A vast literature review was made to cover the main subjects on transformational leadership and open innovation. These theories were then combined with the results from the performed case study. The used technique for data collection was semi-structured interviews which we conducted in three different occasions spread over a three week period. We found out that there are some problems to take into consideration when managing innovations in smaller firms. For example there are some problems for these companies to find and retain skilled staff members due to the lack of time for competence development. Smaller firms also rarely have the time or competence needed to develop new products by themselves. It requires that the firms organization is held flexible to find the needed knowledge externally. The case-study revealed that the indirect positive impact and idealized influence displayed by the leader helps mediating organizational innovation. The studied company also showed characteristics from Chesbrough’s open innovation theories. Co-creation and spin-off activities existed where only co-creation could be seen as part of open innovation. Due to the size and structure of the business in this case study the employees are to be considered as self-managed, that is further strengthened by the empowerment of the leadership organization. The importance of empowerment in conjunction with transformational leadership were discovered. There is a delicate balance between self-management and unity of direction that requires leadership in order to sustain maximum innovation capabilities. During the transition process towards an open innovation approach there are numerous challenges that leadership will face. Many of these negative effects can be minimized by a leader possessing the traits attributable to a transformational leadership. We therefore argue that a transformational leader is a good candidate if the outcome of the transition to open innovation is to be maximized.