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Abstract

This study aims to evaluate the effects of individual creativity, group creativity, internal organizational characteristics, and external factors of knowledge creation toward organizational creativity of small firms in Indonesia creative industry. In addition, it evaluates the relationship between the organizational creativity and the performance. The study was carried out using a cross-sectional survey with 34 samples (convenience sampling). The correlation between key variables was analyzed using path analysis. Results indicate that organizational creativity is significantly influenced by group design creativity, while individual creativity, organizational characteristics, and external factors of knowledge creation have no significant effect on organizational creativity. The results of the study show that if the small creative industry wants to improve its performance, one of the creativity variables that needs to be optimized is the creativity of the design group.

Keywords

Small firms creative industry individual creativity group creativity organizational creativity performance path analysis Indonesia knowledge creation

Introduction

Organizational creativity plays a vital role in the organizational performance. Marion¹ points out that organizational creativity is crucial for organizations to gain and sustain organizational effectiveness and competitive advantage. Robinson and Stern² postulate that the actual results of organizational creativity include organizational changes such as improvement (changes to what is already done) and innovation (new activities for companies). The absence of creativity causes an organization to fail to adapt to changes coming from both inside and outside the company.³ In general, the purposes of changes of a company are included in aspects of performance of the company, such as improvement, innovation, organizational survival, and organizational effectiveness.⁴ Organizational performance can be considered as an output of processes supporting creativity.⁵ Based on such statements, it follows that organizational creativity is essential for continuous improvement of a company and for measure of the occurring changes, one of which is the performance of the company.

Based on a survey by Forester Consulting, the results of 82% of executives surveyed agreed that the company benefited from creativity in the form of increasing revenue and greater market share.⁶ Fifty-eight percent of respondents made creativity their goal, 58% involved customers to achieve it, and 48% of respondents stated that they provided special funds to fund new ideas that came out of the brainstorming process.⁶ Another fact of the importance of creativity based on a survey by IBM of more than 1500 chief executive officers (CEOs) showed that creativity was ranked as number one factor for future business success—in the disciplines of management, integrity, and even vision.⁷ One reason is because creative leaders are more comfortable with ambiguity. Eight of the 10 CEOs surveyed said they hoped their industry would be far more complex.⁷ Some facts that have been acknowledged are clear proof that creativity is important for any business.

Based on the facts presented above, the majority of industries place creativity as an important variable. There is one industry that makes creativity as the main capital; even without the creativity of the industry going to die, the industry is a creative industry. Creative industry is a dynamic industry; they need constant evolution, production in nontraditional terms in accounting, and production methods not to map easily into established metrics.⁸ Based on UNCTAD (2010), creative industries are both knowledge-intensive and labor-intensive, especially those with a high concentration of creative inputs.⁸ The main input of the creative industry is creativity, skills, and talent or known as intellectual capital.⁹ The creative industry is a potential industry, with evidence that the creative industry has been able to produce stable products when facing a global recession and become the fastest growing industry in the global economy.^10,11

The creative industry is believed to become the economic solution of a country after the economic recession in terms of providing employment and maintaining the country’s economic vitality.¹² In other regions (Europe in particular), the creative industry has managed to maintain the added value and economic wealth of European countries and shows the importance of the creative industry.¹²

Creative industries in Indonesia have contributed significantly to the Indonesian economy also. Through the Creative Economy Agency (Bekraf), the Indonesian Government seeks to pay more attention to the creative industry sector, with the aim of maximizing potential and opportunities while overcoming the obstacles and threats of creative industries in Indonesia.¹³ Bekraf has a vision; the creative industry becomes a new strength of the Indonesian economy reflected in the gross domestic product (GDP) growth of the economy. To realize this vision, Bekraf has a mission to build a creative industrial ecosystem that is able to encourage the growth of the number of creative industry businesses, increase added value per company, and encourage creative Indonesian products to succeed in the global market.¹³

The creative industry can also be a promising business for young business people and is very potential for the country’s economy. One of the success stories of the homeland creative industry is PT Maicih Inti Sinergi with turnover Rp. 7 billion per month in 6 months¹⁴ and Go Jek Indonesia with estimated valuations reaching US$5 billion or Rp 71.8 trillion.¹⁵ Based on the above-mentioned two examples, the creative industry has proved to be a promising business choice.

Based on a collaboration survey of Indonesia’s Creative Economy Agency with Statistical Center Bureaus, 97.93% of creative industries are micro and small firms with fewer than 100 workers.¹³ However, they have proved to be a potential industry for the national economy. Based on a survey by Indonesia’s Creative Economy Agency, the creative industries sector contributed 852 trillion to GDP (7.38%), absorbing 15.9 million workers (13.90%), and the export value of US$19.9 billion (12.88%).¹³ The data also show a significant increase in the contribution of the creative economy to the national economy from 2010 to 2017 at 10.14% per year.⁸ That information supported that small firms in creative industry are potential industries for Indonesia.

In the context of organization, organizational creativity is inseparable from the creative process, the creative product, the creative person, the creative situation, and the way in which each of these components interacts with the others.¹⁶ Amabile¹⁷ has produced a research exploring individual creativity, group creativity, and their correlation. Woodman et al.⁴ defined organizational creativity as the generation of a valuable, useful new product, service, idea, procedure, or process by individuals working together in a complex social system. The article was constructed from a theory developed by Woodman et al.⁴ which provides a broad perspective on organizational creativity which integrally connects organizational creativity inputs (creative person, group creativity, and organizational environment), creative process (creative behavior and creative situation), and outputs of organizational creativity (creative idea, product, process and method) and interaction among the factors, more broadly associated with organizational performance.

They are one of a different from other industries due to their main inputs including creativity, skills, and talents, or known as an intellectual capital.⁹ The products of creative industries are so specific, differentiated, artistic, creative, or culture-based^9,18 that the products have high level of state-of-the-art-ness. Creative industries deal with uncertain and high-risk markets since consumers’ tastes play a vital role in production.¹⁸ Therefore, when developing creative industries to increase productivity, the main factor to consider includes management of organizational creativity, that is, from sides of individual creativity, organizational situation (characteristics of an organization), creativity process (group creativity), and the resulted creative products to measure impacts of such creative process on the performance of creative industries.

Research that specifically discusses the relationship among organizational creativity factors in the field of small firms of creative industry and the relationship between organizational creativity and organizational performance is seldom found.¹⁹ In order to fill the gap in the field of organizational creativity, further research is required. Based on the research background, the purposes of the current research are the following:

To find out the influence of organizational creativity on organizational performance of small firms’ creative industry.

To find out the influence of individual creativity, group creativity, organizational characteristics, and knowledge creation on small firms’ organizational creativity.

To provide recommendation to improve performance of small firms’ creative industry.

The article is divided into five sections. The first section includes introduction which discusses research background from theoretical views and existing facts, as well as the purposes of the research. The second section explains theory and hypotheses. The third section discusses research method used, starting from sample selection of small-scale creative industries, sample selection of respondents, procedures of data collection, instrument testing, and data analysis. The fourth section explores the results and discussion of the path analysis and details the correlation of each variable and draws conclusion from each hypothesis discussed in the second section. The fifth section presents discussion, conclusion, and suggestions.

Theoretical model

Studies suggest that organizational creativity is influenced by external and internal factors. The external refers to condition in which an organization does not have any capacity to asserts, such as technology turbulence, economic condition of a country, prevailing values, and society’s perspectives.^4,20 Meanwhile, the internal includes factors an organization may have, to an extent, such as individual creativity, group creativity, and organizational characteristics.^4,21

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The influence of individual creativity on organizational creativity

Individual creativity is a function of personal characteristics (e.g. past reinforcement history, genetic factors, and biographical variables), cognitive abilities, personality, intrinsic motivation, and contextual factors (organizational situation, organizational atmosphere, reward, and punishment systems).⁴ Individuals with various influencing factors either internal or external (such factors from organization as organizational situation, interaction process of individuals in a group) will result in creative behavior as one of the indicators in organizational creativity process. Woodman et al.⁴ believe that creative behavior is resulted from individual creativity process along with creative situation that has an impact on the creative product.

Individuals who have a sense of interest in complex matters, confidence, freedom in making decisions, are interested in various things, have open mindedness, have the ability to provide solutions, and are risk taking are creative individuals who can support the organizational creative process.⁶ The report presented by Amabile¹⁷ also states that curious individuals, high spirits, and intellectual honesty that consistently demonstrated by the R&D section become an important factor for supporting creativity.

Individuals with cognitive ability such as good communicative skills and ease in doing various things also become factors that support organizational creativity.⁴ Individuals who are able to interact well^20,25,26 with colleagues and leaders also facilitate the process of generating new ideas in organization.^4,20

Individual motivation in work also affects organizational creativity. Motivation arising from self-motivation or internal motivation is a passion due to attraction, curiosity, personally challenging or satisfied are cause someone more creative than someone encouraged by external motivation that comes from outside of him, it will affect the creative process for the organization.²⁷ Individual knowledge, technical abilities, and the ability to produce creative products are also very important for organizational creativity, as important as the cognitive and personality abilities possessed by individuals.^17,28 In reference to the above statements, hypothesis 1 is formulated as follows:

H1: Individual creativity positively influences organizational creativity of small firms’ creative industry.

The influence of group creativity on organizational creativity

Woodman et al.⁴ point out that in addition to individual creativity as explained before, group creativity also influences organizational creativity. When interacting in a group with certain characteristics, individuals with certain characteristics will influence their organizational creativity performance. For example, a group with open-mindedness which gets used with open communication between members will give individuals an opportunity to share their ideas related to new products, method, problem-solving, and so on, to encourage more open creativity process resulting in creative products for organization. A leader with cooperative characteristics will allow members to deliver their new ideas related to creative products.²⁹

A group composed by individuals having different backgrounds in diverse fields will have a strong impact on problem-solving process; next they will affect the organization’s creative process.^4,20 The types of interactions that exist within the group, strategies for problem-solving, forms of communication between individuals, and values/norms prevailing within a group affect the creative process.^4,20,30 Woodman et al.⁴ reported that groups that often interact with brainstorming or group discussions will produce more creative ideas so that the chances of creating creative products are also greater.

Cook³¹ proposes that a leader must be able to communicate effectively the vision to act creatively both formally and informally to employees and always encourage them to stay on this path. These visions must be communicated to all levels of management because every action is observed and interpreted by subordinates. The group leader must be well-balanced giving employee his or her freedom and must be responsible, without domination and control and, at the same time, leader must concern for employee feelings and needs, be able to know the creative work and give a feedback, and encourage employee to express his or her opinions, later on the group can support the organizational creativity process.³² Based on the explanation above, hypothesis 2 is formulated:

H2: Group creativity positively influences organizational creativity of small firms’ creative industry.

The influence of internal organizational characteristics on organizational creativity

Organizational characteristic is defined as the internal environment of organization that supports or inhibits the creative process in an organization.^4,21,33 Woodman et al.⁴ with his model stated culture, resources, reward, strategy, structure, and technology as factors of organizational characteristics. Amabile et al.²¹ have assessed the work environment for creativity. They stated that factors can be supportive or can inhibit the creative process in an organization. Organizational encouragement is an internal aspect of the organization that affects the creative process. Encouragement pertains to risk taking, encouraging new idea generation, and valuing new innovations from the highest to the lowest levels of management.^21,34 Supportive evaluation of new ideas is also the aspect of organizational encouragement.¹⁹

Andriopoulos²² notes that when managing organizational creativity, a key challenge is to create an organizational culture, which creates innovative ways to discover problems and find the solution. The basic elements of organizational culture (share values, beliefs, and behavior expected of members of an organization) influence creativity and innovation in two ways³⁰:

Through socialization processes in organizations, individuals learn what behavior is acceptable and how activities should function. Norms were developed, accepted, and shared by individual.

The basic values, assumptions, and beliefs become enacted in established forms of behaviors and activity and are reflected as structures, policy, practices, and procedures. The structure will impact directly on creativity in the workplace.²⁰

A working atmosphere (organizational climate) worthwhile of creativity and innovation requires participation and freedom of expression but also demand performance standard.^20,22,30 Martins and Terblanche³⁰ state freedom as a core value in stimulating creativity, and innovation is manifested in autonomy, empowerment, and decision-making. When organizations give employees the freedom to convey their ideas, their chances of contributing to organizational creativity are higher.

Organizational creativity also requires a strategy to manage its resources (technology, information, funds, time, creative person, knowledge).^22,33,35 Amabile and Gryskiewicz³⁶ argued that the two main resources that effect creativity are time and money. She stressed explicitly the importance of quantity of time and money that should be given to employees could be a supporter or a barrier to creativity. In this study what is meant by organizational characteristics are criteria relating to management policies that either support or inhibit creative processes, strategies, and resources. In reference to such statement, hypothesis 3 is formulated below:

H3: Internal organizational characteristics positively influence the organizational creativity of small firms’ creative industry.

The relationship among knowledge creation, organizational creativity, and organizational performance

Researchers in the field of organizational creativity have agreed that organizational creativity is essential for continuous organizational improvement as a requirement to survive in competition.^4,21,30 Organizational creativity may provide a key to understanding change phenomena and, ultimately, organizational effectiveness and survival.⁴ In the knowledge management field, organizational creativity plays a vital role in organizational improvement.³³ The purposes of the improvement according to Lee and Choi³⁷ and Migdadi³⁸ include several aspects of organizational performance, such as organizational effectiveness, organizational survival, improvement, and innovation. Organizational creativity is at the heart of knowledge management³⁹ and the seed of all innovation.²¹ Lee and Choi³⁷ have discussed knowledge management (knowledge and creativity are closely related), where one of the aims is to measure the relationship of organizational creativity and organizational performance. If creativity is encouraged and reinforced at the expense of operational behaviors, it may decrease organizational performance.³⁷ Therefore, organizational creativity is valuable, but its over-encouragement may not be always useful. For instance, Shani et al.⁴⁰ introduce a framework, which links organizational creativity and organizational performance. Their finding implies that managers pay more attention to organizational creativity in order to improve organizational performance.

Gurteen and Associates³⁹ have conducted research in the field of knowledge management at companies in Australia. One of the research objectives is to analyze the relationship of organizational creativity with organizational performance. Similar to Gurteen and Associates,³⁹ Azma and Mostafapour⁴¹ and Weinzimmer et al.⁴² have formulated a relationship model between organizational creativity and organizational performance. Their research shows that organizational creativity was affected by knowledge creation. This finding is in line with previous studies.^37,38 Nevertheless, their research studies have not touched the forming variables of organizational creativity. Finally, in summary, it can be said that studies that link organizational creativity also cannot explain how organizational creativity influences organizational performance from a creativity perspective. Figure 1 presents the proposed correlation between research variables. Based on such statement, hypotheses 4 and 5 are formulated:

Figure 1.

Research model.

H4: Knowledge creation positively influences small-scale organizational creativity.

H5: Organizational creativity positively influences organizational performance.

Research method

Participants and procedure

The main study utilizes a cross-sectional, self-evaluated survey to empirically examine the hypotheses. The survey sample was determined using a procedure proposed by Creswell⁴³ and Newman.⁴⁴ The research object includes small firms’ creative industry in Indonesia. Sample of the industries was selected using a convenience sampling method. A convenience sampling refers to nonprobability sampling method in which sample is taken from population members who are convenient to access.⁴³ Such method is also known as grab sampling or availability sampling, which is not based on simple random sample, but rather on a criterion that respondents agree to participate in a study by filling a questionnaire.

Prior to the main study, back translation method to translate questionnaire to the researcher’s native language (Indonesia) has done by Brock et al.⁴⁵ Back translation was carried out with the help of a postgraduate student in industrial engineering in Australia to translate questionnaire from English to Indonesian language and an English teacher to retranslate to English. The results of the back translation can be seen in another report.⁴⁶

The formal questionnaire obtained from the back translation was tested in a pilot study. The pilot study aims to evaluate and identify problems of the instrument survey, draft known as typographical errors and grammatical errors, predicting difficulties found when conducting the main survey and finding solution to minimize the difficulties, estimating time needed to complete the questionnaire, measuring data sensitivity obtained from respondents’ perspectives and receiving feedback to improve response rate, as well as assessing face validity and content validity.⁴⁷ The unit of analysis in this research is an organization level. Scope of the study is small firms within creative industry sectors. This research uses multiple respondents for every data set. Data collection from questionnaire in each industry required data of three job titles, and therefore the questionnaire was grouped into (1) top management, (2) leader of design department/R&D, and (3) design employees.

Small-scale creative industries selected as respondents of the pilot study were taken from the researcher’s database in areas of East Java and Yogyakarta. Target respondents were expected to have good representation as creative industries in terms of creativity process. Due to the time limitation in the reported pilot study, the researcher distributed 70 questionnaires. Until the predetermined time limit (June–August 2017), 34 creative firms agreed to participate as respondents and to fill the questionnaire (response rate of 50%). In terms of firm age, many firms have established for more than 15 years (30%), others for less than 5 years (28%) and for 5–15 years (72%).

Variables definition

Table 1 lists details of variables, reference sources, definition, and the number of questionnaire items original and final. All responses were constructed in a five-point Likert-type scale ranging from 1 = strongly disagree to 5 = strongly agree. Six variables were used in the research, comprising of 4 independent variables—individual creativity (X ₁) with 20 statement items, group creativity (X ₂) with 18 statement items, environmental characteristics of organization (X ₃) with 30 statement items, and knowledge creation (X ₄) with 5 statement items—and 2 dependent variables: organizational creativity (Y ₁) with 16 statement items and organizational performance (Y ₂) with 5 statement items. Each variable is tested for validity and reliability so that the statement items used may change (in detail described in the next section).

Table 1.

Research variables and definition.

Variables	References	Definition	Original item
Individual creativity (X ₁)	Woodman et al.,⁴ Amabile,¹⁷ Amabile et al.,²¹ Zhou and George,⁴⁸ Sarooghi et al.⁴⁹	Creation of new idea for organization by individual	20
Group creativity (X ₂)	Woodman et al.,⁴ Amabile,¹⁷ Borghini,²⁰ Sternberg,²⁵ and Mishra and Singh⁵⁰	Creation of new idea for organization by some individuals who are gathered in a group	18
Organizational characteristics (X ₃)	Woodman et al.,⁴ Amabile et al.,²¹ and Amar and Juneja³³	The internal environment of the organization that influence the individual creativity process, whether that is supportive or inhibits the creative process	30
Knowledge creation (X ₄)	Lee and Choi,³⁷ Migdadi,³⁸ and Azma and Mostafapour⁴¹	Knowledge creation is a process of creating new knowledge which is influenced by external and internal factors of the company	5
Organizational creativity (Y ₁)	Woodman et al.⁴	Creation process of a valuable, useful new idea, product, service, procedure, or process by individuals working together in a complex social system	16
Organizational performance (Y ₂)	Dess and Robinson⁵¹ and Dawes⁵²	Organizational performance is generally defined as financial performance and also nonfinancial performance. In this study using financial performance	5

Table 2 presents examples of items and references used. The article measures four independent variables: individual creativity variables are measured based on statement items adopted from Amabile^17,28 and Zhou and George⁴⁸; the group creativity variables are measured using statement items adopted from the research of Amabile et al.,²¹ Zhou and George,⁴⁸ and Madjar et al.²⁹; and variables of internal organizational factors were measured using statement items adopted from Amabile et al.²¹ Knowledge creation variables are measured using statement items adopted from Dess and Robinson.⁵¹ The first dependent variable is organizational creativity measured using statement items from Woodman et al.⁴ and Zhou and George,⁴⁸ while organizational performance variables use items adopted from Dawes.⁵²

Table 2.

Item examples and references.

Variables	Item example	References	Number of item valid
Individual creativity (X ₁)	Update with the knowledge in his/her job	Amabile,^17,32 Zhou and George,⁴⁸ and Sarooghi et al.⁴⁹	13
	Searches out new technologies, processes, techniques, and or product ideas
	Special qualities in the personality of problem solver
	Unconventional/doing differently
	Excited with the job it self
	Motivated with the job primary by money
Group creativity (X ₂)	My supervisor discusses with my work related ideas in order to improve them	Amabile et al.,²¹ Madjar et al.,²⁹ and Zhou and George⁴⁸	16
	There is a good blend of skills in my workgroup
	There is a feeling of trust among the people I work with almost closely
	Has a good rapport of others
Organizational characteristics (X ₃)	New ideas are encouraged in this organization	Amabile et al.²¹	20
	Employees decide when to take breaks from the work
	I feel that I am working on important projects
	The budget for my project(s) is generally adequate
	People in this organization are very concerned about protecting their territory
	Top management does not want to take risks in this organizations
Knowledge creation (X ₄)	Direct interaction with customer	Nonaka and Takeuchi⁵⁶	5
Organizational creativity (Y ₁)	Develops adequate plans and schedules for the implementation of new ideas	Woodman et al.⁴ and Zhou and George⁴⁸	12
	Project task call for people to be creative
	Our company produce more new product than competing
Organizational performance (Y ₂)	Our company more success than competing	Dawes⁴⁹	5
Organizational performance (Y ₂)	Our company more growth than competing	Dawes⁴⁹	5

Results

Instrument validity, reliability, and correlation

In the pilot study of organizational creativity in small firms’ creative industry, the measurement of validity and reliability was due to independent variables, dependent variables, and statement items described in Table 3. Validity is associated with the accuracy level of a measuring tool.⁵¹ This section discusses validity of research variables measured quantitatively using convergent validity with Pearson’s correlation. The results of validity measurement indicate that (1) there were 6 discarded statement items in independent variable X ₁, such as expertise1, cognitive3, RO1, RO2, IM3, and EM2 and therefore the number of statement items used to measure instrument of X ₁ was 13; (2) there were 2 unused statement items in variable X ₂, such as leadership1 and social skill3; (3) there were 10 unused statement items in variable X ₃ such as encouragement2, encouragement6, all off item in freedom, challenge2, challenge3, and workload1, consequently 33 statement items were obtained; and (4) there was only 1 valid statement item in endogenous variable Y ₁, such as PC₂.

Table 3.

Correlation and reliability score.^a

No	Variables	1	2	3	4	5	6
1	Individual creativity (X ₁)	0.818^b	0.495**	0.783**	0.164	0.077	0.401*
2	Group creativity (X ₂)		0.794^b	0.396*	0.218	0.619**	0.591*
3	Internal organizational factors (X ₃)			0.90^b	0.258	−0.092	0.184
4	Knowledge creation (X ₄)				0.654^b	0.273	−0.025
5	Organizational creativity (Y ₁)					0.855^b	0.380*
6	Organizational performance (Y ₂)						0714^b

^a N = 34.

^bReliability score based on Cronbach’s α > 0.7.

*p < 0.05.

**p < 0.01.

Instrument reliability is related to consistency of instrument measurement. The results of evaluation in general are shown in Table 3, indicating value of Cronbach’s α coefficient of each variable. The method presented by the Cronbach is useful to measure inter-item reliability. The values of α coefficient of all variables are considered reliable (above 0.7).⁵³ To conclude, all research variables are so reliable or consistent that they can be used for further research.

Screening data and test before path analysis

At this stage, several steps were taken, namely screening outlier data, normality testing, and multicollinearity tests. The Mahalanobis value of each sample can be seen in Table 4. Using significance level 0.001 and the number of variables as 6, the Mahalanobis limit value is 16.81. The Mahalanobis value result shows that all of the samples have a value less than 16.81, meaning all the sample data will use in next step.

Table 4.

Outlier.

Number of sample	Mahalanobis distance	Number of sample	Mahalanobis distance
1	11.32517	18	3.72529
2	9.87814	19	4.3411
3	13.87327	20	4.33274
4	7.53628	21	2.32457
5	3.84741	22	0.77217
6	6.19077	23	2.93585
7	2.62403	24	8.64481
8	6.67031	25	5.29198
9	2.77291	26	1.05027
10	9.42592	27	4.53967
11	4.18779	28	2.4821
12	6.49546	29	3.87995
13	1.00471	30	5.49153
14	10.75631	31	1.91683
15	8.10863	32	0.55278
16	1.63277	33	3.10376
17	0.94704	34	2.33767

The results of normality test using one sample k test obtained significance level 0.200 greater than 0.05, meaning that the data have been normally distributed. The last test was multicollinearity test, as shown in Table 5. From Table 5, it was seen that all of variables had a variance inflating factor (VIF) score less than 10 and had tolerance score greater than 0.1, which means all of the variables have no multicollinearity.

Table 5.

Multicollinearity test.

Variable	Tolerance	VIF
Individual creativity	0.498	2.006
Group creativity	0.477	2.095
IntOrgChar	0.413	2.423
Knowledge creation	0.699	1.431
OC	0.412	2.427

OC: organizational creativity; VIF: variance inflating factor.

Table 6.

Summary of model (adjusted R ², df ₁, df ₂, path coefficient, sig, and result).

Model	Adjusted R ²	df ₁	df ₂	Path (β) coefficient	Sig	Result
Path analysis #1	0.531	4	30		0.000	Could not reject model
Individual creativity><organizational creativity				−0.095	0.578	Could not reject H₀₁
Group creativity><organizational creativity				0.598	0.000	Reject H₀₂
Internal organizational factors><organizational creativity				−0.479	0.006	Reject H₀₃
Knowledge creation><organizational creativity				0.378	0.005	Reject H₀₄
Path analysis #2	0.151	1	33		0.392	Reject model
Organizational creativity><organizational performance				0.151	0.392	Could not reject H₀₁
Path analysis #3	0.258	5	29		0.018	Could not reject model
individual creativity><organizational performance				0.368	0.094	Could not reject H₀₁
Group creativity><organizational performance				0.575	0.013	Reject H₀₂
Internal organizational factors><organizational performance				−0.397	0.100	Could not reject H₀₃
Knowledge creation><organizational performance				−0.030	0.869	Could not reject H₀₄
Organizational creativity><organizational performance				-0.192	0.418	Could not Reject H₀₅

Path analysis

After instrument testing had been conducted with output in the forms of valid and reliable measuring tools, the researcher intended to see what phenomenon occurred in field using data of the pilot study. For such a purpose, the researcher tried to measure the individual correlation between variables and path analysis. Path analysis refers to a statistical technique used to individually test causal correlation between two or more variables. The essence of path analysis is based on systems of linear equation. Causal relationship involves two kinds of variables: independent variables (exogenous) and dependent variables (endogenous). The path analysis of the correlation between variables is demonstrated in Figure 1.

Path analysis #1

Path analysis on the first layer is intended to see the path coefficients between variables of X ₁ (individual creativity), X ₂ (group creativity), X ₃ (internal organizational factors), X ₄ (knowledge creation), and Y ₁ (organizational creativity). It is clear from Figure 2 and Table 3 that were not effect of X ₁ to Y ₁ (β = −0.095) with a significance value of 0.578 (more than 0.05), meaning that individual creativity is not significantly associated with organizational creativity. Variable X ₂ correlates with Y ₁ (β = 0.598) with a significance value of 0.000, meaning that group creativity is significantly associated with organizational creativity. Variable X ₃ has the coefficient of −0.470 with a significance value of 0.006, and therefore this follows that internal organizational characteristics are negative significantly associated with organizational creativity. The last variable, knowledge creation, has the β coefficient of 0.378 with a significance value of 0.005, meaning that knowledge creation is significantly associated with organizational creativity. Model of path analysis #1 has a value of adjusted R ² (Table 6) of 0.531. To conclude, 53.1% of the variation in Y ₁ can be explained by the variation of variables X ₁, X ₂, X ₃, and X ₄.

Figure 2.

Correlation and path coefficients between variables X ₁, X ₂, X _3, X ₄, and Y _1.

Path analysis #2

The purpose of path analysis #2 is to see the effect of Y ₁ (organizational creativity) to Y ₂ (organizational performance). It is clear from Figure 2 and Table 6 that the correlation coefficient of Y ₁ and Y ₂ is 0.151 with a significance value of 0.392, indicating that organizational creativity is not associated with organizational performance. The value of adjusted R ² of model of path analysis #2 is 0.023, meaning that 2.3% of the variation in Y ₂ can be explained by the variation of variable Y ₁, while 97.7% is explained by other variables outside the model. Such value of adjusted R ² is categorized low. Due to the researcher’s intention to examine another possibility that the variables which are able to explain variable Y ₂ come from other exogenous variables, a path analysis similar to model of path analysis #3 is required to conduct (Figure 3).

Figure 3.

Path coefficient between variables Y ₁ and Y ₂.

Path analysis #3

In reference to Figure 4 and Table 6, the path coefficient and significance values (numbers in parenthesis) between variables X ₁, X ₂, X ₃, X ₄ and Y ₁ with Y ₂. There are 5 value (X ₁-Y ₂, X ₂-Y ₂, X ₃-Y ₂, X ₄-Y ₂ and Y ₁-Y ₂). In conclusion, variables of individual creativity, organizational characteristics, and knowledge creation did not exert an influence on organizational performance, while only group creativity is significantly associated with organizational performance. The value of adjusted R ² resulted from the model of path analysis #3 is considered low (0.258). Such model indicates that 25.8% of the variation in Y ₂ can be explained by the variation in variables of X ₁, X ₂, X ₃, X ₄, and Y ₂, while 74.2% of others are explained by other variables outside the model.

Figure 4.

Path analysis #3 correlation between variables X ₁, X ₂, X _3, X ₄, Y ₁, and Y ₂.

Discussion

The study investigation of the path coefficient is between individual creativity, group creativity, organizational characteristics, and organizational creativity, especially in the small firms’ creative industry. The study objective is also for seeing the correlation between organizational creativity and organizational performance. Due to the limitation of data used in the study, the researcher applied path analysis to individually analyze the correlation between variables. The results of the study give several contributions for research.

First, the research belongs to the first empirical study developed from models of Woodman et al.⁴ and Amabile et al.²¹ on creative industries but implemented to small firms’ creative industry.⁴⁹ The results of the research indicate that a creative person in person does not significantly influence to organizational creativity of small firms’ creative industry. Such fact is in line with the statement of Woodman et al.⁴ that a creative person is insufficient to form creative organization; group situation supporting individual creativity and organizational environment conducive for a person to be creative is required. Similarly, Amabile¹⁷ points out that individual creativity alone does not exert an influence on organizational creativity; a person needs support of group environment and organizational environment, supporting creative process to motivate those to have creative behavior. Zhou and George⁴⁸ outline that one of the main factors to make a person creative is organizational support. When an organizational situation is conducive for the employees to share their new ideas or to give opinions, the individual creativity will develop. Similarly, the previous research with research object of common industries indicates that a creative person in an organization either creative industries or noncreative industries is insufficient to form a creative organization; other variables are required to support individual creativity process.

Another result shows that group creativity significantly influences small-scale organizational creativity process. Such fact is in accordance with statements of Madjar et al.²⁹ Chandra and Neelankavil⁵⁴ and Gumusluoglu and Ilsev,⁵⁵ who report that one factor of creative groups is a leader who give freedom for individuals to deliver their opinion. Similarly, Woodman et al.,⁴ Amabile,¹ ⁷ Sternberg,²⁵ and Mishra and Singh⁵⁰ report that organizational creativity from the side of group composition also exerts an influence on creative situation supporting organizational creativity. Groups with diverse members either in knowledge or in experience in the field of work are proved to be able to improve organizational creativity process. Borghini²⁰ and Sternberg²⁵ consider the support of group creativity from the side of members’ social abilities; groups with members having good social abilities (who are able to interact, communicate, and work together) can support organizational creativity process.

In line, results are shown in terms of organizational characteristics. The research indicates that organizational characteristics influence organizational creativity process of small firms’ creative industry. Previous studies proved that organizational characteristics influence organizational creativity in creating creative situation for individuals.^20,21,33 Borghini,²⁰ Andriopoulos,²² and Martins and Terblanche³⁰ argue that organizational situation giving freedom for the members is a factor influencing organizational creativity process. Freedom of speech, opinion, and expression can encourage creative ideas.

Different results are also shown in knowledge creation. The research indicates that knowledge creation influences organizational creativity negatively. Previous studies proved that knowledge creation had positive effect on organizational creativity.^37,38,41 The results of this study differ from previous studies. The results of the research are different from those of previous research for several reasons. First, the sample industries belong to micro and small firms’ creative industry for which management has not yet been structured. The organizational activities rely on an owner as a decision maker. Therefore, the owner’s leadership strongly influences processes occurring in an organization; the leader’s characteristics have been accommodated through variable of group creativity. In reference to such results, creative industries, particularly in Indonesia, should have structured management to avoid relying the industries on one or some persons. Second, the creative industry as objects of research has not applied knowledge management approach for their creativity process. They have not intensively interacted with stakeholders in the creativity process. For example, they have not yet obtained information from suppliers and competitors related to new product ideas. The relationship with stakeholders is still limited to routine matters of production operational problems.

The last result of the path analysis, the organizational creativity, is not correlated with organizational performance. The results of this study are different from previous research statements that have not been supported by empirical data⁴ and research that has been supported by empirical data.^21,30,37 This study shows that organizational creativity that is built from individual creative behavior and creative situation of group and organizational characteristics with output in the form of creative products and methods positively does not correlate with organizational performance.

Managerial implications

The results of the study indicate that in order to increase the creativity of the small firms’ creative industry, we need to pay attention to several things. First, the small firms must implement a leadership system that is in line with organizational culture. In Indonesia, leadership that is in accordance with Indonesian culture is democratic leadership. The ability of a leader can also be improved with special leadership training, such as problem-solver training, decision-making, and managing a team.

Second, the group variable in small firms’ creative industry represents the organization itself. Quality teams/organizations are organizations where healthy interactions occur among members, mutual trust, synergy in each process, and healthy competition. This can be improved by training the building team, regular outbound, and regular meetings.

Third, increasing organizational support by encouraging participation of all employees in the organization, giving freedom of expression and experimenting in motives/designs/colors, having written rules and performance standards and implemented, encouraging the preparation of initial ideas in the manufacture of products/services, and encouraging all employees to creative. Organizational support can also be in the form of improving structures and systems, among others: having organizational structure even though it is simple in writing and implemented, has a system for evaluating employees in writing and implemented, and has a payroll system that supports creativity.

Fourth, the company not only increases its resources but also creates a system that makes it easier for employees to access it for the sake of the creativity process. The process of adding resources includes finding and having creative human/employee resources and good skill levels; seeking information about assistance; and setting up teams to be able to access assistance in the form of financial assistance, tools, training, and assistance.

Fifth, companies also toned to be bold enough to take risks in piloting the creative process, such as testing new machines; new methods; or new processes in terms of funding, raw material use, and the utilization of other facilities. Companies dare to challenge employees in making creative products. Companies also need to give appreciation to employees who receive the challenge.

Conclusion and further study

Organizational creativity is an important factor for organizational performance. Based on this study, it did not prove that organizational creativity has a significant positive effect on organizational performance. Low R values show that organizational creativity is valuable to a certain level, but over encouragement will lead to decreased organizational performance. This result is linear with the research presented by Lee and Choi.³⁷

This study shows that group creativity, organizational characteristics, and knowledge creation affect small firms’ organizational creativity significantly; however, individual creativity has no effect on organizational creativity of small firms’ creative industry. It may happen because almost all of the decisions are made by the owner as the leader of the group/firm.

One of the main drawbacks of the pilot study is the limited number of sample. Only 34 industries were taken as sample. The small number of sample with different sectors of industry results in limited tools for analysis. Further study should add the number of small-scale creative industries with the same sectors or different sectors.

Furthermore, further study should discuss factors influencing each research variable used in detail. For example, factors influencing variable of individual creativity should be explained in detail (such as individual domain-specific knowledge, motivation, personality, and others). More detailed explanation of each variable will make analysis more complete and detailed.

Footnotes

Declaration of conflicting interests

The author(s) declared no potential conflicts of interest with respect to the research,authorship,and/or publication of this article.

Funding

The author(s) disclosed receipt of the financial support for the research,authorship and/or publication of this article: This work was supported by the Ministry of Research,Technology,and Higher Education of Indonesia for the Article Processing Charge through a research grant scheme.

ORCID iD

Retno Indriartiningtias

Budi Hartono

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