Location and Innovation: Creating a Unique Identity in a Competitive Market

EVANSTON, Ill., Sept. 1 /PRNewswire/ -- A new study from the Kellogg School of Management at Northwestern University finds that local communities contribute to an organization's ability to differentiate itself from other existing organizations. The study, led by Brayden King, assistant professor of management and organizations at the Kellogg School, suggests new organizations face twin pressures: the need to be different and the push to blend in with competing organizations. The latter pressure tends to be overwhelming in conditions of uncertainty; and as a result, organizations need more help distinguishing themselves from their peers.

King and his co-authors explored organizational identity emergence by focusing on the founding years of charter schools in Arizona. As a result of permissive legislation under the 1994 Arizona School Improvement Act, Arizona's charter schools initially imposed few identity constraints. Legislation provided public funds to a variety of organizations – public, non-profit, for-profit and existing private schools – that were freed from most regulations with the exception of civil rights, health and safety, and testing requirements.

The authors conducted two analyses to assess the realization of a charter school identity. First, they identified elements shared by schools adopting the charter school identity. Elements were coded relating to three important facets: substantive theme, resources and services and target population. Secondly, they used regression analysis to explain variation in adherence to a particular cluster of identity elements.

King described organizational identity as "the DNA of an organization's personality" and stressed how it affects every facet of an organization from choosing its product lineup and marketing strategy to the kinds of business relationships it forms.

"Differentiation is a fundamental challenge for any organization, but especially for young entrepreneurial organizations in competitive markets," he added. "Most policymakers assumed that if you create a market for unique education models, innovation and differentiation will just happen, but our study shows that schools tended to differentiate themselves more in some districts than others because of the local cultural resources available to them."

Through their analyses, the authors concluded that school districts with a past history of working with alternative educational models and those that had fostered a sense of entrepreneurial spirit tended to produce the most innovative charter school identities.

In addition, organizations in environments that are rich in alternative models are less likely to conform to their peers because they have access to more diverse identity templates and because identity differentiation has legitimacy.

While this research focuses on charter schools, the findings can be applied to other industries where innovation is common. According to King, businesses such as restaurants, software companies and retail stores need to emphasize their distinctive qualities if they want gain a competitive advantage.  

"The success of Silicon Valley, for example, is in part an example of collective creativity that translated into innovative company designs," said King. "Engineers and software designers created an intense culture of creativity that also led to unique product offerings and human resources policies, as well. Their local communities foster an independent spirit that provides them legitimacy to push the boundaries."

The study, "Identity Realization and Organizational Forms: Differentiation and Consolidation of Identities among Arizona's Charter Schools," will appear in an upcoming issue of Organization Science.  King co-authored the research with Elisabeth S. Clemens of the University of Chicago and Melissa Fry of the Mountain Association for Community Economic Development.

MORE INFORMATION:  To see the full study, published in an upcoming issue of Organization Science, or to arrange an interview with Professor King, contact Meg Washburn or Jenna Simenic at the contact information listed below.

For more information about the Kellogg School of Management at Northwestern University, visit http://www.kellogg.northwestern.edu.

SOURCE Kellogg School of Management at Northwestern University

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