Abstract

We investigate the individual and interaction effects of functional and numerical flexibility on new ventures’ innovation. Functional flexibility is considered to be favourable for the accumulation of tacit knowledge, increasing creativity and innovation (Kalleberg, 2001). However, many core elements of functional flexibility seem unlikely to apply to new ventures, which are so uncertain and unstable that they often have no choice but to be market-based in their approach to employees (Cardon, 2003). In this context new ventures might use numerical flexibility to enhance their innovation potential (Gardon, 2003). Bringing highly skilled flexible workers in new ventures may infuse the organization with new ideas and potentially help create new knowledge and entrepreneurial insight. Flexible workers may have extensive prior experience and higher-quality knowledge than others (Nonaka, 1994), which may be transferable to new ventures that engage them (Matusik & Hill, 1998). In this light we hypothesize that innovation in new ventures depends on both functional and numerical flexibility and most importantly we attempt to provide evidence that the effects of these two flexibility modes on innovation are complementary.

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