THE IMPACT OF BUREAUCRACY ON CREATIVITY AND INNOVATION IN THE ADVERTISING AGENCIES OF PAKISTAN

By

Atif Bilal

Enrolment: 01-280112-005

A DISSERTATION SUBMITTED IN PARTIAL FULFILMENT OF

THE REQUIREMENTS FOR DEGREE OF

DOCTOR OF PHILOSOPHY

In Management Science

To

FACULTY OF MANAGEMENT SCIENCES

BAHRIA UNIVERSITY, ISLAMABAD

2017

2

Abstract

In the present era characterized by uncertain market conditions, mounting competition, spiraling diversity and mobility of workers, and increasing customer power, organizations should strive for achieving a lasting competitive advantage. It is believed that unless organizations focus on creativity and innovation, they cannot compete effectively and earn economic returns. The dynamic organizations like advertising agencies are especially required to be creative and innovative in order to lead, grow and compete. These organizations have mostly implemented bureaucratic control practices, such as formalization and centralization, to regulate and control the behaviors of workers. Prior research indicates that these bureaucratic practices stifle creativity and innovation. The paradox between bureaucracy, creativity and innovation has created a challenging situation for the managers in advertising agencies. The main objective of the study was to empirically investigate the impact of organizational bureaucracy on employee creativity and organizational innovation in the advertising agencies of Pakistan. Data for this study was collected through surveys distributed to a sample of 455 employees from the advertising agencies of Pakistan. Various techniques were applied to statistically analyze the data and test the hypotheses. Findings from statistical analyses indicate that organizational bureaucracy and its components, formalization and centralization; have a negative impact on employee creativity and organizational innovation. Also, creativity has a positive impact on innovation. Besides, the results of the indirect hypotheses support the postulation that creativity mediates the relationship between bureaucracy and organizational innovation in the context of advertising agencies of Pakistan. The study not only makes important theoretical contributions, but also presents valuable insights to the managers of the advertising agencies of Pakistan. Findings strengthen the nature of control-creativity paradox indicating that excessive bureaucratic control in organizations leads to reduced creativity and innovation. In addition, findings suggest that managers and policy makers should take into account the flexibility in administrative controls to encourage creativity and innovation in order to gain a competitive edge in the turbulent environment.

Keywords: bureaucracy, formalization, centralization, employee creativity, organizational innovation, process innovation, product innovation, managerial innovation, advertising agencies

Table of Contents

CHAPTER 1: INTRODUCTION OF THE STUDY11.1 Background of the Study11.2 Advertising Agencies in Pakistan71.3 Gap Identification91.4 Problem Statement131.5 Research Objectives151.6 Research Questions161.7 Significance of the Study161.8 Definitions of the Key Terms181.9 Delimitations of Study191.10 Structure of the Dissertation201.11 Summary of the Chapter21CHAPTER 2: LITERATURE REVIEW232.1The Concept of Bureaucracy232.1.1 Original Model of Bureaucracy292.1.2 Patterns of Bureaucracy322.1.3 Primary and Secondary Tension342.1.4 Work to Rule Problem352.1.5 Theory of Moral Mazes362.1.6 Bureaucracy in Management/Administrative Sciences372.1.7 Bureaucracy and its Contrasting Views392.1.8 Components of Organizational Bureaucracy402.2 Formalization and centralization—The Soul of Bureaucracy442.2.1 Formalization452.2.2 Centralization472.3 Employee Creativity502.4Organizational Innovation552.4.1 The Concept of Innovation552.4.1.1 Innovation Typology562.4.1.2 Development of Innovation Concept582.4.2 Process Innovation642.4.4 Product Innovation672.4.5 Managerial Innovation692.5Linking Bureaucracy, Creativity and Innovation742.6 Summary of the Chapter78CHAPTER 3: THEORETICAL FRAMEWORK803.1 Introduction to Framework803.2 Relationships among Hypothesized Variables813.2.1 Bureaucracy and Innovation813.2.2 Formalization and Innovation843.2.3 Centralization and Innovation853.2.4 Organizational Bureaucracy and Employee Creativity863.2.5 Formalization and Employee Creativity873.2.6 Centralization and Employee Creativity883.2.7 Employee Creativity and Organizational Innovation883.2.7.1 Employee Creativity and Process Innovation903.2.7.2 Employee Creativity and Product Innovation913.2.7.3 Employee Creativity and Managerial Innovation913.2.8 Mediation of Employee Creativity in Bureaucracy-Innovation Relationship923.2.9 Mediation of Employee Creativity in Formalization-Innovation Relationship943.2.10 Mediation of Employee Creativity in Centralization-Innovation Relationship963.3 Summary of the Chapter97CHAPTER 4: RESEARCH METHODOLOGY994.1Introduction994.2 Study Model and Hypotheses994.3 Research Philosophy1004.4 Purpose of the Study1034.5 Research Approach1044.6 Deductive Reasoning1054.7 Design for Hypotheses Testing1054.8 Research Strategy1064.9 Time Horizon1064.10 Unit of Analysis1074.11Population of the Study1074.12 Target Population and Sampling Frame1074.13 Sample Frame1084.14 Sample Size of the Study1084.15 Sampling Method and Technique1094.16 Instrument1104.16.1 Questionnaire: Part 11114.16.2 Questionnaire: Part 21124.16.2.1 Organizational Bureaucracy1134.16.2.2 Formalization1134.16.2.3 Centralization1144.16.2.4 Employee Creativity1144.16.2.5 Organizational, Process, Product and Managerial Innovation1154.17 Scale Validity1154.17.1 Content and Face validity1164.18 Reliability1174.19 Pilot Testing1174.20 Administration of Survey1184.21 Ethical Consideration1194.22 Preliminary Data Analysis1204.22.1 Inclusion of Questionnaires for Data Analysis1214.22.2 Treatment of Non-Response1214.22.3 Decoding of the Data1214.22.4 Outlier Treatment1224.23 Data Analysis1224.23.1 Hypothesis Testing1224.23.1.1 Direct Hypotheses Testing1234.23.1.2 Mediation Analysis1244.24 Limitations of Methodology114CHAPTER 5: RESULTS OF THE STUDY1165.1 Reliability of Instrument1165.2 Descriptive Statistics1165.3 Assumptions of Hypothesis Testing1175.4 Correlation Analysis1205.5 Direct Hypothesis Testing1235.6 The Results of Indirect Hypotheses1295.7 Summary of the Chapter141CHAPTER 6: DISCUSSION AND CONCLUSION1426.1 Discussion1426.2 First Objective of the Study1436.3 Second Objective of the Study1456.4 Third Objective of the Study1466.5 Fourth Objective of the Study1486.6 Conclusions1496.7 Implications of the Study1516.8 Limitations of the Study1576.9 Future Research Avenues1596.10 Summary of the Chapter160References161Appendix 1: Sample Frame213Appendix 2: Questionnaire218Appendix 3: Central Tendency Analysis and Item to Total Correlation225Appendix 4: Tests for Assumptions for Hypotheses Testing228Appendix 5: Estimates of the Tests of Indirect Hypotheses Testing234Appendix 6: Plagiarim Report247

LIST OF TABLES

Table 1.1: Total Media and Mobile Internet Ad Spending……...……………….….07

Table 4.1 Characteristics of the Sample…………………………………………….111

Table 4.2: Results of Pilot Testing of the Instrument………………………………117

Table 5.1: Scale Reliability Analysis………………………………….……………116

Table 5.2: Descriptive Statistics of Variables………………………………………117

Table 5.3: Correlation Matrix……………………………………………...……………...120

Table 5.4: Results of Direct Hypotheses Testing…………………………………..124

Table 5.5: Results for Hypothesis 8………………………………………………..129

Table 5.6: Results of Hypothesis 8a………………………………………………..130

Table 5.7: Results of Hypothesis 8b…………………………..……………………131

Table 5.8: Results of Hypothesis 8c………………………………………………..132

Table 5.9: Results of Hypothesis 9………………………………………………...133

Table 5.10: Results of Hypothesis 9a……………………………………………….134

Table 5.11: Results of Hypothesis 9b………………………………...…………….135

Table 5.12: Results of Hypothesis 9c……………………………………………….136

Table 5.13: Results of Hypothesis 10………………………………...…………….137

Table 5.14: Results of Hypothesis 10a………………………...……………………….…138

Table 5.15: Results of Hypothesis 10b……………………...................................…139

Table 5.16: Results of Hypothesis 10c………………………….………………..…140

List of Figures

Figure 3. 1: Theoretical Framework ………………………………………..…….….80

CHAPTER 1: INTRODUCTION OF THE STUDY

This chapter gives a detail picture of the present thesis and sets the foundation for the proceeding chapters. In this chapter, the background of the study is provided along with the problem statement, research objectives, research questions, significance of the study, research gap, the contribution of the study, and definition of the key terms. The structure of the thesis is also presented at the end of the chapter.

1.1 Background of the Study

The present field of inquiry is based on the organizational behavior and psychology theories developed by the most influential gurus in the discipline of business and management sciences. The theory of bureaucracy presented in Webber’s (1946) published work titled “Essay in Sociology” emphasized in the field of public administration and social structure. The major characteristics of bureaucracy presented in this essay include a fixed division of labor, a hierarchy of positions and authority, administration based on written documents and adherence to general rules, thorough and expert training of personnel, and full-time commitment to official activities in the organization (Clegg, 2009; Clegg et al., 2016).

Earlier studies on bureaucracy have focused on the formal relations to regulate activities in social and organizational settings (Barley, 1986). A number of influential scholars like Gouldner (1955), Merton (1940), and Selznick (1949) zoomed on the consequences of the presence and absence of the bureaucratic control in social and business organizations. The notion of bureaucracy was shifted from social settings to the corporate world in the early 1960s (Hage, 1965; Hall, 1963; Inkson, Pugh & Hickson, 1970). A number of studies next in line focused on the types and structures of the bureaucratic controls in different organizational settings (Blau, 1974; Hall, 1963; James & Jones, 1976).

A number of studies on the notion of organizational bureaucracy and its variables have been the focus of many influential scholars for their theoretical and empirical importance (Clegg et al., 2016; Donaldson, 2001). The theory of bureaucracy holds a vital importance in the organizational structure (Pennings, 1999). The recent studies identified formalization and centralization to be the main issues and components of organizational bureaucracy (Bolin & Harenstam, 2008; Caruana, Morris & Vella, 1998; Raub, 2007).

Different organizations have different bureaucratic structures on which the level of formalization and centralization differ (Bolin & Harenstam, 2008). The relevant literature considers formalization and centralization to be the most dominant components of bureaucracy (Caruana et al., 1998; Raub, 2007; Burns & Stalker, 1961; Bolin & Harenstam, 2008). Centralization is considered as the extent to which employees can participate in the decision-making process (Caruana, Morris & Vella, 1998), while formalization is the rigidity of rules and regulations to control behaviors of employees within the organization (Hall, 1999). Both these components, i.e., decision-making involvement and formal rules and regulations are the main bureaucratic ways of managing activities in organizations (Blau, Peter, Richard & Schoenherr, 1971).

Adler and Borys (1996) demonstrated that bureaucracy may provide opportunity to employees within the organizations to develop their skills in terms of creation of tacit knowledge and its transference to their successors. Further, it is emphasized that bureaucracy fosters uniqueness or differentiation that gradually increases the organizational core competency and impersonality to compete in the market place with competitors (Fantuzzo, 2015). These views clearly indicate that organizational bureaucracies provide stability within the firm and take a long-term vision of the organization and its relationship to the internal and external environment.

On the other hand, Sutherland and Duke (2004) and Vega (2012) highlighted that organizational bureaucracy develops a number of impediments such as unsupportive culture, red-tapism, complex processes, excessive focus on control instead of flexibility and work place autonomy for creative and innovative minds within the organizations (Green, 2013). The review of relevant literature indicates that proponents of organizational creativity and innovation have a common consensus on these impediments and oppose the prevailing views of organizational bureaucracy (Amabile, 2016; Amabile, 1996; Ling, Chok & Colleges, 2013).

In the present era characterized by uncertain market conditions, mounting competition, spiraling diversity and mobility of workers, and increasing customer power, organizations should strive for achieving a lasting competitive advantage. It is believed that unless organizations focus on creativity and innovation, they cannot compete effectively and earn economic returns. The dynamic organizations like advertising agencies are especially required to be creative and innovative in order to lead, grow and compete (O’Donohoe, 2013).

Individuals should be given flexibility within the organization if they are to be creative and innovative (Rigolizzo & Amabile, 2015; Raub, 2008). They may also need autonomy to make rational decisions about the effectiveness of an organization, particularly in case of advertising agencies (Steensma & Kantarjian, 2014). As observed from the relevant review of the literature, the dynamic organizations in developed economies have been moved towards decentralization and lenient rules at the workplace (Raub, 2007) to improve their productivity and maximize utilization of individuals’ potential to enhance the overall performance of the firm. Obviously, managers and employees are least bothered to give their creative input in any decision making process if they have not been delegated any authority to make any decision or become a part of it (Sullivan, 2013). This might be the case, particularly in case of creative and innovative organizations like advertising agencies as they have less time to be responsive to satisfy the need of their key stakeholders (Vega, 2012).

The impact of bureaucracy on employee creativity and innovation is evident from the extensive review of literature in different organizational settings (Smith & Yang, 2004; Hirst, Van Knippenberg, Chen & Sacramento, 2011). Kim and Leckenby (2002) suggested that bureaucratic control demotivates employees, which result in loss of interest in creative and innovative thinking within the organization. These views were also confirmed by another study conducted by Raub (2007).

An extensive review of literature indicates that bureaucracy, in dynamic organizations, defines the SOPs and delegation of power at all levels of the organization. Van-de-Ven and Ferry (1980) and Raub (2008) argued that if the bureaucracy is based on such clear and crystal guidelines for the delegation of authority and power, then why the following questions about bureaucracy arise:

i. Why there is a paradox between bureaucracy, and creativity and innovation?

ii. Why do bureaucrats have fear to lose their control on creative and innovative minds, and their work processes?

iii. Why do bureaucratic organizational structures generate ill feelings among creative and innovative individuals?

iv. Why do organizational members rely too much on rules and SOPs, and do not think out of the box?

An extensive review of literature indicates that there is nothing intrinsically wrong about the notion of organizational bureaucracy (Adler, 1999; Blau, Peter, Richard & Schoenherr, 1971; Romero, 2012). Based on scholars’ views, it seems that the fault lies with people who run the organization; who prefer the pursuit of power and status for the follow up of operating efficiency (Jones & Thompson, 2007). These managers may prefer to protect their careers and promotions rather than their organizations. The managers may also prefer to use resources to achieve maximum benefits for themselves while ignoring organizational effectiveness. Therefore, the literature has shown support that organizational bureaucracy stifles creativity and innovation in organizations.

The advertising agencies make adverts and ideas, which are the key factors for creating effective advertisements (Taylor, Hoy & Haley, 1996). There is no second opinion that creativity and innovation are the soul of an advertisement, and they may look different because of the novelty and uniqueness of new ideas and their successful implementation. The advertising agencies in Pakistan attempt to follow the trends of creativity and innovation, which are being adopted globally (Nixon, 2003). They are gradually moving towards creativity and innovation because of the dynamic business environment. Kim and Leckenby (2002) argued that IT wave has created intense competition in the corporate world, particularly in the advertising agencies and has forced them to become more creative and innovative for their survival. There is no doubt that IT may have a significant role in enhancing creativity in the advertising agencies (Fitzsimmons & Fitzsimmons, 2013), but at the same time, there are certain organizational impediments that may stop the individuals to use their potential skills to make the organization more creative and innovative to cope up with the dynamic environment. There are countless barriers (that will be discussed later) for creativity and innovation within the organizations, and one of the major impediments is organizational bureaucracy (Hrist et al., 2011; Grabner & Speckbacher, 2016).

The creative and innovative think tanks such as advertising agencies in general and specifically of Pakistan may need a lot of experts, who create products and services that cannot be standardized with every piece of work. It might be argued that an organization where that kind of individuals who hold the different expertise (creativity and innovation) may need less control and more decision making power. Furthermore, the strategies suppose not to be implemented top-down, but emerge while the individuals explore the new terrain.

The advertising is considered the fundamental source of business drive throughout the world. The importance of advertising cannot be denied in any form of business for attracting the customers to gain competitive advantage within the industry. In the year 2015, the advertising industry around the world has spent $592.43 billion, which is a 6% increase from the year 2014 (eMarketer). Pakistan’s total annual advertisement expenditure has exceeded Rs. 65 billion in 2015. The ad spending of 2015 of top five countries of the world is mentioned in the table below.

Table 1.1: Total Media and Mobile Internet Ad Spending, 2015

Country

Total media ($)

Digital ($)

Mobile Internet ($)

USA

1,898.06

58.61

28.24

China

73.13

30.81

12.14

Japan

40.19

9.61

3.37

Germany

27.71

6.67

2.11

UK

25.25

12.59

4.67

Worldwide

592.43

170.5

64.25

Source: eMarketer, 2015

Considering the world advertising statistics, it is evident that US has mostly remained the most dominant advertising market in the world. From last many decades, the United States has dominated the world of advertising in terms of spending, creativity and innovation. The French advertising agencies are next in line to make brilliant ads with unique style, creative ideas, celebrity endorsement and humor. In fact, most of the American multinationals hire French advertising agencies in order to vaunt the merits of their products in order to succeed. Although the United States is still perceived as the mecca of advertising innovation, French advertising has clearly developed its own unique style.

1.2 Advertising Agencies in Pakistan

The advertising business in Pakistan has grown at a fast pace in the past few decades, and the entire idea of advertising organizations has transformed in a matter of a couple of years (Abbasi, Akhter & Umar, 2011). Advertisement organizations are in charge of promoting and advertising goods and services. Such organizations are in charge of thinking of innovative thoughts for limited time campaigns. Every top advertising organization has diverse types of customers from all over the world and it is the case in Pakistan (Rohra, Bashir, Khwaja & Nazir, 2008).

Some advertising agencies focus on upgrading innovativeness of a brand. In innovativeness, the attention stays on plans of action to take care of marketing the products and services through commercial campaigns (Rohra et al., 2008). Advertising agencies can be of all sizes ranging from small to medium agencies and offer a variety of services. These agencies have some expertise in ‘innovative’ or configuration-based plans of action. The essential part of their work is the formation of the creative ads for the marketing of a product or a service.

Some advertising agencies offer services like media buying for promotion or publicity. At present, there are specialist advertising agencies, which give full support of general-line advertising. In Pakistan, there are numerous advertising agencies that give services to in-house advertising. These agencies develop a picture of the brand over a number of years, along the same lines, making progression between all parts of a particular campaign.

As creativity and innovation are the foremost requirements of the advertising agencies in Pakistan, there is a need to study the bureaucratic control factors that foster or hinder creativity and innovation. Therefore, the context of advertising agencies of Pakistan has been selected to test the relationship between organizational bureaucracy, creativity and innovation.

1.3 Gap Identification

Employee creativity that leads to organizational innovation has become very essential for the survival of the organizations (Amabile, 1989; Amabile, 2016; Zhou, 2012). Creativity is referred to as the idea generation, whereas innovation is the successful implementation of new ideas for the betterment of the organizational stakeholders (Amabile, 1988). A number of management gurus and scholars have attempted to identify the personal, contextual and organizational factors that affect creativity and innovation at workplace (Hirst, van Knippenberg & Zhou, 2009; Shalley, Zhou & Oldham, 2004; Amabile, 2012). In search of factors affecting employee creativity and organizational innovation, researchers have sought to identify the bureaucratic control factors that foster or hinder creativity and innovation (Grabner & Speckbacher, 2016; Zhou & Shalley, 2008; Klein & Kozlowski, 2000).

Madjar, Greenberg and Chen (2011) found that if employees are allowed to take risks and are provided support, they tend to show creative and innovative behavior. Ohly et al. (2006) reported that bureaucratic routinization stifles idea generation and idea implementation. The results indicate that when employees are performing routine work, they lose interest in creative ideas. The previous research has reported that de-centralized (Cohendet & Simon, 2007; Jung et al., 2008), structures with harmonization or commitment to low power differentiation (Shipton et al., 2006) and low formalization (Jung et al., 2008), support employee creativity. These studies did not take into account the impact of bureaucratic control on innovation, which is the end result of creativity.

Baer (2012) investigated the relationship between creativity and innovation. The results demonstrated that creativity might not be a guarantee for innovation. Baer (2012) further suggested that more investigation is required to elaborate the findings of the study in different contexts.

The previous literature on bureaucracy, creativity and innovation in the form of books and research papers has shown problematic results. These problematic results have created great disarray for the scholars and practitioners in the field of management sciences.

Dyer and Dyer (1965) presented an argument making claims that bureaucratic practices are opposite to the new idea generation and implementation in the organizations. Thompson (1969) presented his argument reporting that bureaucracy is favorable for innovation, but not for creativity. Another conceptual contribution was made by Schumann (1993) claiming that if organizations want to be creative and innovative, they must instill flexibility and adaptability in their managerial style, which is contrary to the pure bureaucratic practices. The same views have been shared by other studies in the field of bureaucracy, creativity and innovation (Feldman, 2000; Nelson & Winter, 1982).

The recent literature on bureaucracy, creativity and innovation has added a considerable body of knowledge in the different organizational contexts around the world. Hrist et al. (2011) conducted an empirical study in the Taiwan Bureau to measure how bureaucracy in the form of formalization and centralization influences employee creativity. The results indicated that high formalization and high centralization negatively affect employee creativity. The study further suggested that this relationship may also be tested in other parts of the world in different organizational settings. The literature suggested that there is a complex relationship between bureaucracy and creativity, and it may vary to a great deal in different organizational settings (Sullivan, 2013).

A study conducted by Green (2013) demonstrated that organizational bureaucracy impedes employee creativity. The study suggested that the future research can be conducted on the relationship between the bureaucracy and organizational innovation.

Su (2014) explored the relationship between bureaucracy and organizational innovation. The study explored the overall innovation and suggested that the dimensions of organizational innovation, i.e. product, process and managerial innovation, may be explored in the bureaucratic settings in order to reach more in-depth understanding. Another recent empirical study has tested the relationship of leadership style, creativity and innovation (Muceldili, Turan & Erdil, 2013). The study suggested that future research must investigate the relationship of creativity and innovation with other organizational factors. Wynen, Verhoest, Ongaro and Van-Thiel (2014) argued that controls like formalization and centralization have a negative association with innovation in the public sector. The organizational factors affecting product innovation studied by Im, Montoya and Workman (2013) showed mixed results of the relationship between organizational factors and product innovation. The study further recommends that the results may be evaluated in the other settings using specific organizational factors that enhance or impede product innovation.

Formalization and centralization are considered to be the essence of organizational bureaucracy. These two dimensions have been the most dominant factors that hinder employees’ free thinking, and creative and innovative behavior (Hrist et al., 2011; Demirci, 2013; Grabner & Speckbacher, 2016). Wei, Yi and Yuan (2011) showed the moderating role of formalization in learning and innovation. The results suggested a u-shaped relationship of formalization with innovation. The study suggested that direct relationship of formalization with innovation can also be tested in different settings in the developed and developing countries.

The literature suggests mixed results between the relationship of creativity and innovation. Baer (2012) suggested that it is not necessary that creativity will lead to innovation. Dino (2015) reported that in order to enhance innovation, creativity must be encouraged. Dul and Ceylan (2011) reported that to enhance creativity, physical work environment must be supportive. The study suggested that research must be conducted that evaluates the relationship between non-physical work environment factors and employee creativity. Chan and Lu (2013) suggested that future research is needed to identify whether there are any contextual variables, including management policies and practices (Hon, 2011; Shalley & Gilson, 2004) that influence employee creativity and innovation.

In overview, there have been relatively few theoretical propositions papers, model development papers, or conceptual development pieces over the recent period. The detailed review of relevant literature on bureaucracy, creativity and innovation has shown considerable gaps in the body of knowledge. The literature review revealed that there have been very few empirical studies in developing countries like Pakistan, which have investigated the combined relationship of bureaucracy, creativity and innovation. Furthermore, most of the available studies have been conducted in different parts of the world in a variety of organizational settings, but there has been no comprehensive study in Pakistan, especially in the context of advertising agencies to establish the relationship of bureaucracy, creativity and innovation.

Without doubt, much have been done in the range and variety of advances in creativity and innovation research, yet the researchers have turned a blind eye towards the detailed analysis of the relationship between bureaucratic practices, employee creativity and innovation. The literature also poses a question: does bureaucracy facilitate or hinder employee creativity and organizational innovation? —an unsolved puzzle in creativity and innovation research.

Therefore, the present study investigates the relationship of organizational bureaucracy, formalization and centralization (Bolin & Harenstam, 2008; Caruana, Morris & Vella, 1998; Raub, 2007), with employee creativity (Amabile, 1999) and organizational innovation including product, process and managerial innovation in the advertising agencies of Pakistan.

1.4 Problem Statement

The importance of creativity and innovation has gained a lot of research attention from the practitioners and academicians (Ang et al., 2007). In order to deal with a challenging situation to communicate a clear message to the customers, organizations are focusing on creative advertisement. Deuze (2016) suggested that future advertising scenario will be about creative ideas. Therefore, the advertising agencies in Pakistan are required to be more creative and innovative for their survival in the industry. The organizations, in order to manage their workforce; implement bureaucratic controls (Spekle, Van-Elten & Widener, 2015; Raub, 2007). The literature suggested that bureaucratic control stifles creativity and innovation in the organizations (Grabner & Speckbacher, 2016; Hrist et al., 2011; Amabile, 1998; Sullivan, 2013). Therefore, for a long term survival, there is a dire need for the advertising agencies to identify and weed out the factors that hinder creativity and innovation in the workplace.

The founding father of bureaucracy, Webber (1946), highlighted a number of issues of organizational bureaucratic control in his work “Essay in Sociology” and several emerging models have appeared and disappeared to address these issues. Unfortunately, these models and frameworks put the mist on these issues and still they remain with the organizational world in this new era (Mele & Canton, 2014; West, 2015). The present study contends that there is a need to develop an effective framework to encourage employees’ creative ideas and their implementation within the organization in the form of process, product, and managerial innovation (Zhu & Chen, 2014). The present study also contends that controls like formalization and centralization are essential requirements for an organization to maintain discipline and consistency in employees’ work within the organizations. Therefore, Hirst et al. (2011), Sacramento (2011) and Bolin and Harenstam (2008) emphasized in their studies that there is a need of dynamic bureaucracy to run the smooth operations of the organization that ultimately impact the overall productivity of the firm.

Although, different studies have been conducted by a number of scholars like Blau et al. (1962), Thompson (1963), Smith and Yang (2004), Hage and Jerald (1965), Raub (2007), Hrist et al. (2011), Baer (2012) and Shaikh (2016) in the discipline of business and management sciences to get the right match and develop the right balance between bureaucracy and individual creative ideas, and their implementation in the form of innovation, yet the relationship is not well known as mixed results have been achieved (Zhang & Zhou, 2014; West & Sacramento, 2012; Bunderson, 2003; Ling, Chok & Colleges, 2013). The present study attempts to resolve the tension within organizations and identify the impact of bureaucratic control factors on creativity and innovation that may reduce this anxiety in general and specifically in the advertising agencies of Pakistan. Therefore, based on the above discussion the central research question of the present study is formulated in the form of the problem statement:

It is imperative to examine the relationship between organizational bureaucratic control in the form of formalization and centralization, and employee creativity and organizational innovation including process, product and managerial innovation. Furthermore, it is important to determine the mediating role of employee creativity between the relationship of bureaucracy and innovation in the context of advertising agencies of Pakistan.

1.5 Research Objectives

The specific objectives of the present study are:

i. To determine the impact of bureaucratic control (i.e., formalization and centralization) on innovation (i.e., product innovation, process innovation and managerial innovation) in the advertising agencies of Pakistan

ii. To determine the impact of bureaucratic control on employee creativity in the advertising agencies of Pakistan

iii. To identify the impact of employee creativity on innovation in the advertising agencies of Pakistan

iv. To examine if employee creativity mediates the relationship between bureaucracy and innovation in the advertising agencies of Pakistan

1.6 Research Questions

The following research questions are formulated to achieve the set objectives of the present study:

i. What is the impact of bureaucratic control (i.e., formalization and centralization) on innovation (i.e., product innovation, process innovation and managerial innovation) in the advertising agencies in Pakistan?

ii. What is the impact of bureaucratic control on employee creativity in the advertising agencies in Pakistan?

iii. What is the impact of employee creativity on innovation in the advertising agencies of Pakistan?

iv. What is the mediating role of employee creativity between the relationship of bureaucracy and innovation in the advertising agencies of Pakistan?

1.7 Significance of the Study

The study may contribute to resolve the tension between bureaucratic control, and creativity and innovation in the competitive corporate world of today. Moreover, it will be helpful in identifying the ways to make a balance between control and creativity that can be maintained within the organizations to enhance their overall performance. It will also help to find out the impact of major bureaucratic factors on creativity and innovation in the process, product and managerial innovation at large and specifically in the context of the advertising industry of Pakistan.

The theoretical framework of the study presented in Figure 3.1 depicts the causal relationships between independent and dependent variables. These linkages play a significant role in answering the central research question and in achieving the set objectives of the present study. The accomplishment of the key aims of the study may contribute in the three kinds of knowledge (i.e., theoretical, research, and policy and practice). The significance of the study in each kind of knowledge is as follows:

i. In terms of theoretical knowledge, it presents a framework in the context of advertising agencies for the interpretation and explanation of bureaucratic control, and creativity and innovation in the form of process, product and managerial innovation

ii. In the context of research knowledge, the study describes the systematic inquiries into policy and practice in the context of advertising agencies of Pakistan

iii. In terms of practice, it may inform professionals who evaluate managerial control practices

iv. In the form of policy, the present study proposes changes in control practices that might be desired by policy makers in the context of advertising agencies of Pakistan

Another significance of the study is that it generates the desired knowledge in theory, research and practice and policy:

i. Knowledge for understanding: The study attempts to develop theoretical and research knowledge from a relatively impartial point of view. The rationale is to understand (rather than change) practice and policy, and the underlying bureaucratic control ideologies of the advertising agencies of Pakistan.

ii. Knowledge for critical evaluation: The field of inquiry attempts to develop theoretical and research knowledge from an explicitly negative point of view towards the existing bureaucratic practices and policies in the context of advertising agencies of Pakistan. The rationale is to criticize and expose the prevailing ideology of bureaucratic control, and creativity and innovation.

iii. Knowledge for action: The present study attempts to develop a practice, relevant theoretical and research knowledge, taking a positive standpoint towards practice and policy. The justification is to inform effort to bring about improvement within the prevailing ideology of bureaucratic control and creativity and innovation.

1.8 Definitions of the Key Terms

Operational definitions of all these variables are presented below:

Organizational bureaucracy: Bureaucracy refers to formalization and centralization to maintain the consistency in organizational control and to comply with the minimum standards (Bolin & Harenstam, 2008; Caruana, Morris & Vella, 1998; Raub, 2007).

Centralization: Centralization is considered as the extent to which employees can participate in decision making (Caruana, Morris & Vella, 1998). The lesser participation of employees in decision making, the higher is centralization.

Formalization: Formalization is the extent of written rules, regulations and documentations to control behaviors of employees in an organization (Hall, 1999).

Employee creativity: Employee creativity is the production of new, unique and workable ideas (ad making) and these ideas to be creative must be different from the already developed ideas (Amabile, 1989).

Innovation: Innovation is considered as the practical implementation of creative ideas to make a new product, practice or a process (Axtell, Holman & Wall, 2006).

Process innovation: Process innovation is the practical implementation of a new, unique or an improved method of production (ad making). Such innovations are characterized by the increase in production, quality or efficiency (Frost & Egri, 1991).

Product innovation: Product innovation is defined as the development of new product/service; change in the design of the current product/service or the use of new material to improve any of the components of a product/service (Yeoh & Calantone, 2015).

Managerial innovation: Managerial innovation is considered as the introduction of new or novel management practice in an organization (advertising agency) that has the ability to solve managerial problems (Jain, Powers, & Sanghavi, 2015; Van-de-Ven, 1986).

1.9 Delimitations of Study

There are some delimitations of the scope of this study, which are to be discussed before making any generalization.

Firstly, the present research is empirical in nature and has been conducted in Pakistan, a developing country located in Asia. Therefore, before making any generalization to other countries, the economic, cultural, legal and business related influences must be kept in mind. A cross-cultural, cross-business and environmental analysis using the same variables may strengthen the generalizability of the findings.

Secondly, the data has only been collected from advertising agencies (private ownership) and the study does not include data from any other kind of organization. The findings and suggestions may not be implementable for other business types.

Thirdly, the data for the present study was cross-sectional and did not include in-depth analysis of the opinions of the respondents. Although, all possible measures have been taken to avoid response biases, yet there might be chances of their occurrence.

Fourthly, the data was collected from three cities of Pakistan i.e., Islamabad, Lahore and Karachi (having 90% of the registered advertising agencies in Pakistan). These cities are considered to be the hub of business activities in Pakistan. Therefore, the context was found to be suitable for conducting the research in three cities.

Lastly, some of the advertising agencies (employees) did not respond to the questionnaire, hence they did not provide data for the present research, which might be a delimitation of the research.

1.10 Structure of the Dissertation

Perry (1998) suggested that a comprehensive thesis (research work) should be divided into five or six chapters. The present thesis is divided into six chapters whose outline is discussed below:

Chapter 1—Introduction: It gives a detail picture of the present thesis, which sets out the foundation for the following chapters. The background of the field of study was provided along with the problem statement, research questions, research objectives, significance of the study, and identification of gaps, delimitations and the definition of the key terms.

Chapter 2—Literature Review: This chapter comprehensively discusses the literature on the concepts of bureaucracy, creativity and innovation. After exploring the literature on the variables of the study, the identified relationships by previous research are explored to further understand the nature of the constructs and concepts.

Chapter 3—Theoretical Framework: This chapter provides a discussion of theoretical framework, which is derived from the detailed review of literature. Further, the theoretical background and causal relationships identified in previous research are discussed in detail, based on which the direct and indirect hypotheses are drawn.

Chapter 4—Methodology: It draws a complete picture of the methods that have been used to conduct the present research. The justification and rationale of each step are discussed in detail to reflect clarity. This chapter contains a brief discussion on research paradigm, research design, research approach, unit of analysis, time horizon, research survey, sample population, target population, sample technique, sample size, survey instruments, validity and reliability, pilot testing, ethical considerations, data collection, data analyses and limitations of the methodology.

Chapter 5—Data analyses, Results and Findings: The results in the form of tables and text are presented in this chapter. The chapter mainly focuses on reporting the main statistical results that were obtained through the data analyses. The Cronbach’s alpha and descriptive statistics (mean, standard deviation, skewness and kurtosis) are presented at the beginning. Further, the Pearson’s correlation matrix, and results of direct and indirect hypotheses are exhibited in tables and in text.

Chapter 6—Discussion, Conclusions and Implications: This chapter discusses all the direct and indirect hypotheses in light of the main findings. The findings are compared with studies from previous literature. The practical and theoretical implications of the study are also discussed in this chapter. After that, the limitations of the research leading to a direction for future research are presented.

1.11 Summary of the Chapter

The purpose of this chapter was to introduce the study. In this chapter, the background of the thesis has been discussed with the support of relevant literature in the area of bureaucracy, creativity and innovation. The logical foundation of the area under investigation based on theoretical perspectives has been developed. Then, the broad problem area leading to the problem statement, research objectives and research questions have been discussed. The detailed identification of gaps in literature has also been discussed in the chapter. At the end the definitions of key terms have been given.

The chapter 2 will provide the extensive literature review on bureaucracy, creativity and innovation along with the theoretical relationships of the main constructs and their concepts.

CHAPTER 2: LITERATURE REVIEW

This chapter provides a detailed overview of the available literature regarding the area under investigation. The first section covers the literature on organizational bureaucracy in the form of formalization and centralization. The second section explores the literature on employee creativity, while the third section covers the literature on organizational innovation, process innovation, product innovation and managerial innovation. After reviewing the literature on the variables of the study, the identified relationships by previous research are critically evaluated.

2.1 The Concept of Bureaucracy

The study of organizational theory must necessarily begin with a discussion of bureaucracy. The word ‘bureaucracy’ has been derived from the word ‘bureau’, a French word borrowed into German, which means ‘a desk’ or ‘by extension an office’. Bureaucracy can be defined as an authority being exercised from a desk or an office (Kilcullen, 1996; Adler, 2012). Although the origin of the concept of bureaucracy can be found in ancient times, it was Max Weber, who coined the idea of bureaucratic management in his theory of bureaucracy (Gerth & Mills, 1948; West, 2015).

According to Encyclopedia Britannica, “bureaucracy is a special form of organization defined by complexity, division of labor, permanence, professional management, hierarchical coordination and control, strict chain of command and legal authority”. Bureaucracy, as defined by, Weber is a system of organization that lays emphasis on the accuracy, speediness, regulation and efficiency achieved through perfect division of labor, hierarchy of authority, firm obedience to formal rules and regulations, and communication on the basis of written documents (Raelin, 2012; Morgan, 1986).

Bureaucracy relies on authoritative decisions, division of labor and established rules, which make individuals follow the rules that have been made by others, accept tasks that have been assigned by others, and fear the sanctions that those in control impose at their discretion (Adler, 2012; Preston, 1987). According to Weber (1946), organizational characteristics that constitute a bureaucratic organization are: division of labor, hierarchy of authority, extensive rules, separation of administration from ownership, and hiring and promotion based on technical competency (Hall, 1963). In an informal sense, bureaucracy can be thought of as a “red tape, over-controlling bosses and apathetic employees” (Adler, 1999, p. 36).

Weber’s conception of bureaucracy was an effort to formulate an ‘ideal archetype’ for organizations. Although, he acknowledged that his conception of ‘ideal bureaucracy’ is not existent in reality, he envisioned it as a foundation for theorizing how the work can be done in large organizational settings (Robbins, Coulter & Vohra, 2010). Though the Weber’s conception of the ‘ideal type’ has been misperceived by social scientists, it was an effort to make an ‘epistemological basis’ for the concepts of social scientist and is constructed on a “distinctive process of selection and synthesis, which sets it apart from the conceptual tools of the other branches of science” (Hekman, 1983, p. 122).

Although Max Weber has been blamed for advocating a bureaucratic model of control as the best way to organizational design, and being ignorant of the unanticipated consequences and its impact on the human aspect (Weiss, 1983); however, there has been serious confusion of Weber’s large collection of writings with respect to his impression that the bureaucratic form of organization constitutes an ideal type. Many of the confusions can be related to the point that when Weber used the word ‘ideal’, many post-modernists thought that meant the best; however, Weber never claimed that bureaucracy is the best type of organization (Shaikh, 2016).

Bureaucratization is initiated in part by the spread of rationalized myths in society. These myths generated by specific organizational practices have legitimacy built on the assumptions that they are rationally effective, and this, in turn, involves the advancement of the contemporary institutional systems (Ling, Chok & Colleges, 2013; Meyer & Rowan, 1977). Most organizations are bureaucratized for the belief of ‘mechanistic mode’, which has formed our most basic conception of organizations. Observing the similarities among the industrial mechanization and the spread of bureaucratic forms, Weber noted that bureaucratic forms can routinize the administration process just as machines routinize production (Morgan, 1986).

In a sense, the emergence of bureaucratic organizations witnessed something incredible. A new system of management and control was emerged which has machine-like characteristics at the heart of economic model (Wang & Kafouros, 2009). It could serve as a kind of socioeconomic system in a way which makes organizations more efficient but less human. Whereas, the concept was not conceived as the best form of organization by Max Weber, the hidden idea of bureaucracy in the contemporary business world could be summed up as a social experiment which had to dominate workers and labors on the basis of rational legal authority (Shaikh, 2016).

In earlier times, societies organized themselves either around traditional or charismatic forms of authority, however, Weber believed that industrialization has created a third form of authority and he considered it as rational-legal or bureaucratic authority (Hatch & Cunliffe, 2006; Ling, Chok & Colleges, 2013). In his book Economy and Society, Weber recognized three kinds of social domination that could become valid or legitimate forms of authority and called these the rational-legal, the traditional and the charismatic (Roth & Wittich, 1978). Although all these kinds of social domination have different underlying perceptions to validate authority, Weber considered bureaucratic administrative systems as a more sophisticated expression of rational-legal authority (Lounsbury & Carberry, 2005; Mansour & Ghazawneh, 2015). According to Weber, the purest type of exercise of legal authority is that which employs a “bureaucratic administrative staff” (Roth & Wittich, 1978 p. 220).

Weber has himself identified that the use of ‘rationalization’ must rest on the ‘value-postulate’ (Raelin, 2012; Dong, Liao, Chuang, Zhou & Campbell, 2015; Kalberg, 1980). However, with the exercise of rational legal authority, domination can be justified and validated, and seen as normal and socially acceptable. Such insincere view of rational legal authority can never be justified and validated (Espedal, 2015). Hatch and Cunliffe (2006, p. 31) have established that Weber has himself warned that without taking values into consideration under substantive rationality, formal rationality can lead to an ‘iron cage’ capable of imprisoning human civilization and making every human being a ‘cog in an ever-moving mechanism’ (Hatch & Cunliffe, 2006). Moreover, rational legal authority in a bureaucratic organization largely relies on cumbersome procedures and seriously hinders adaptation of modern concepts like job enrichment, job enlargement, employee creativity, TQM, flexibility, autonomy, etc. Therefore, rational legal authority, which is the essence of bureaucratic form of organization, is invalid and spurious without considering value-based standards in the form of substantive rationality (Satkunanandan, 2014).

Weber was mostly interested in the validation, justification and legitimization of particular forms of domination through the use of rational-legal authority. Weber tried to justify rational-legal authority as a legitimate form of domination. In order to ensure domination, Weber laid the specific and necessary conditions in the form of division of labor, hierarchy of authority, firm obedience to formal rules and regulations, and communication on the basis of written documents, e.g. the concept of fixed division of labor marked by clear hierarchy relying on rational-legal authority can be thought of as a form of domination (Weiss, 1983). So workers should be in command justified. In this context, ‘bureaucratic authority’ or ‘rational-legal authority’ was not something new and cannot be justified and validated (Bendix, 1956). It was not a social change in the legitimization of authority; however, the main objective was the same domination which can also be traced in ancient times. But this time, the concept of rational legal authority was used only to legitimate so as to control workers to fit properly within the new model of domination (Stazyk & Goerdel, 2011).

In his book The Protestant Ethic and the Spirit of Capitalism, Weber (1998) mentioned that modern capitalism has created a “stahlhartes Gehiuse”, a notion that Talcott Parson translated as the ‘iron cage’ with the help of the ‘iron cage metaphor’. Parson (1983) mentioned the difficulty of humankind being imprisoned in a socioeconomic structure (Baher, 2001). Weber’s perception of bureaucratic organizations as an ‘iron cage’ and the associated instrumental reasoning clearly shows that he was skeptical about the merits of bureaucratic form of organization (Greenwood & Lawrence, 2005). Weber has himself acknowledged the limitations of bureaucracy by discussing how it can trap us in an ‘iron cage’, a metaphor been used by many theorists to study how social life is undermined by rational-legal authority, hierarchy and control mechanisms (Hatch & Cunliffe, 2006; Raelin, 2012).

According to Weber, it is nearly impossible to eliminate bureaucracy as a social arrangement once it is fully established in an organizational setting (Gerth & Mills, 1948). It is one of the most important problems of contemporary management and organizational behavior that bureaucratic way of thinking is so deep-seated in our mindset that it is almost impossible to form and organize other than this. Though many substitutes to the bureaucratic model of control have appeared, the basic conception of ‘bureaucratic control’ as domination on the basis of rational-legal authority still persists (Meier & Capers, 2012). According to Walton (2005), the new advances of flatter hierarchies, temporary structures, flexible work systems and networked activities can exist and adjust within the model of bureaucratic control which accommodates such new forms because all these advances do not alter the overall control and domination significantly (Grabner & Speckbacher, 2016).

Weber’s corpus of scholarship on the bureaucratic mode of organization based on rational-legal authority is a substantial piece of work. It has the potential to be used by contemporary organizational theorists for advanced empirical investigation, further theoretical construction and subsequent improvement of the ‘core philosophy’ of the bureaucratic model as conceived by Weber (Fantuzzo, 2015). An empirical investigation has shown that Weber’s ideal type can assist in building a model which accounts for informal characteristics, however the study revealed that Weber’s ideal type ‘rational bureaucracy’ is unlikely to produce a stable social system (Udy, 1959). The implication of this analysis of bureaucracy point towards a new direction for the study of bureaucracy and subsequently the validity of Weber’s model of bureaucratic control. Further empirical work must be done to examine the justification, legitimation and validity of the bureaucratic model of control on the basis of rational-legal authority (Meier & Capers, 2012).

The bureaucracy has been the most dominant perspective when it comes to the different models of organization (Agranoff, 2014). The bureaucratic model for organizations is so dominant and deep-rooted in the organizational structure that no other model can replace or eliminate its existence completely (Morgan, 1986). This model is aimed at achieving specific goals for the organization through the explicit administrative and structural controls and practices in an organization (Adler & Borys, 1996). The bureaucratic controls are mainly used to control and monitor human labor. Bureaucracy gives organizations a mechanistic image, which has been the most dominant feature of all the business and management strategies at all levels (Inkson, 1970).

2.1.1 Original Model of Bureaucracy

Weber in his original model of bureaucracy argued that the authority in an organization should be clearly defined, unambiguous and stable. However, a question was raised by Parsons (1963) that subordinates follow orders either because of formal authority or superior knowledge of the superordinate, then what if the person having formal authority has less technical knowledge in a particular domain and still have the formal authority to make orders. Parsons (1963) in his example referred to a problem with legitimate authority saying that if a person in command is making decisions have less technical competence, the merit hiring is violated. Gouldner (1954) also pointed out the practical violation of the legitimate authority of Weber’s bureaucracy. The power or authority in Weber’s bureaucracy is based on legitimate rationality as well as based on the formal position in the organization (Anderson, De-Dreu & Nijstad, 2004). This can be highly conflicting as: “in the first emphasis, obedience is invoked as a means to an end; an individual obeys because the rule or order is felt to be the best known method of realizing some goal. In the second conception, the individual obeys the order primarily because of the position occupies by the commanding person”.

Gouldner (1954) pointed out that order compliance is based on two different bases, (i) to obey the order to achieve organizational goals, and (ii) to obey the command as an obligation of subordinate to compliance with superior orders. In the first case, the subordinate believes that the order of the superior is aligned with the overall goals of the organization, while in the second instance; organizational members are obligated to obey the orders as they are coming from the superior person holding a higher position in the hierarchy. Considering this situation the authority of bureaucracy can be self-contradictory.

From the debate of Parson (1963) and Gouldner (1954) it is evident that Weber’s bureaucracy’s endemic nature has infected all the models of organization that followed it. On one hand, bureaucratic organizations have a clear and defined power structure to govern humans at a workplace, whereas on the other hand, the model is not appropriate in gaining human compliance of orders from the superior (Albrow, 1970). Considering the conflicting nature of the bureaucratic organizational structure, humans in organizations are treated as objects as well as subjects at the same time. When humans are obeying orders of their superiors for the sake that they have to obey them because of their formal legitimate position, they are being treated as objects or machines. However, these humans are also making rational decisions. They must possess the knowledge, skills and abilities to make calculated judgments about the complex situations, treating them as subjects (Satkunanandan, 2014).

Merton (1957) was next in line to discuss theory of bureaucracy in detail. His main focus was to observe and research about the dysfunctional nature and unintended consequences of Weber’s rational bureaucracy. He was the first among the sociologists to coin the term “unintended consequences”. He discussed the results of unplanned and paradoxical nature of social bureaucracy and its special actions on humans. He argued that organizational behaviors are the most important features of an organization to achieve its rational goals (Harenstam, 2008). However, when these behaviors are controlled by written rules and regulations, employees are just reproducing the expected behaviors and not rational ones. In the same zeal, he also conducted the analysis of dysfunctional results of bureaucratic control due to its structural and highly normative practices.

Merton (1957) and Meier and Capers (2012) discussed the term bureaucratic personality. They argued that rigid rules, regulations and excessive commitment to these normative controls lead to the formation of a bureaucratic personality, which stifles the creativity and innovation (Grabner & Speckbacher, 2016; Hrist et al., 2011). Workers at workplace are too busy obeying rules and regulations that they forget the real goals of the firm. Bureaucratic controls are meant to develop the rational characters of employees, but in contrast, these controls develop the ritual character of the employees, hindering thinking out of the box (Amabile, 1983). Employees spend most of their time in obedience to the bureaucratic rules and controls, which does not allow them to think creatively and innovatively. In this situation, employees are being encouraged to adhere to the rules, methods and procedures, while ignoring the organizational goals on the whole. During the detailed review of the literature, it was indicated that many researchers share the same view (Oldman & Cummings, 1996; Shalley, 1991; Hirst et al., 2011).

Gouldner (1950) studied bureaucracy in his series of different studies in the manufacturing firms, especially in the gypsum mining industry. Through the findings of those studies, the author argued that Weber was himself not clear about the compliance of rules by the workers in an organization. The author explained that there was a great ambiguity, whether the compliance was based on the value of rules and regulations, or the authoritative orders of the persons in power/position.

2.1.2 Patterns of Bureaucracy

Gouldner (1954) was the first among the social scientists to give the idea of patterns of bureaucracy in his classic study. The author’s idea of the patterns of bureaucracy was based on the assumption that in a particular organization, it is not necessary that the interests of the workers are aligned with the interests of the managers. The interests of worker may vary from that of managers in different work related issues. Therefore, there is a need to examine whether the interests of managers (top management) are conflicting or representative with the interests of the workers. Gouldner (1954) divided his patterns of bureaucracy into the three types: (i) mock bureaucracy (ii) representative bureaucracy (iii) punishment-centric bureaucracy.

i. Mock bureaucracy reflects such rules that are of no interest to the main concerning parties of the organization. Therefore, they are not carefully enforced and often violated, e.g., the no smoking rule in an organization might not be the keen interest of managers or workers, but it is there to satisfy the third party (e.g., insurance company).

ii. Representative bureaucracy refers to the rules that are of most interest to the managers as well as to the workers. These rules are strongly and closely followed by both managers as well as workers. The rules about the safety and health in an organization (like, mining industry) are the rules that all the parties follow religiously to make sure that no one is injured at the workplace.

iii. Punishment-centric bureaucracy represents the rules that are of great interest to one party, but the other party feels penalized when enforced. The rules like pay deductions for the absenteeism are such rules. This form of bureaucracy is mostly implemented and widely contested in the organizations.

A question arises that: from where the punishment-centric rules come from? Gouldner (1954) answers this question in his analysis arguing that these rules come from the lack of interests of one party (managers) in the other party (workers) as the first party believes that workers will not fulfill the roles given to them in the organization.

Blau and Scott (1962) and Hrist et al. (2011) reconfirmed the previous studies concluding that bureaucratic rules and regulations create such environment in the organization which leads to routiness, ritualism, over conformity to the rules, and discouragement of change, newness, novelity, creativity and innovation (Du-Gay, 2000). In these studies it was seen that both managers and workers spend more time in obeying and following the rigid rules and procedures than in actually working towards the achievement of the organizational goals. Workers, when controlled against their will through bureaucratic practices, tend to deviate from these rigid rules and find alternatives to get the job done (Igbaria & Baroudi, 1995). This deviation creates tension between bureaucracy and goal achievement for the organization (Zho, 2013).

2.1.3 Primary and Secondary Tension

Gouldner (1954) touched another aspect of bureaucratic contradiction and divided it into two types of tensions i.e., primary tension and secondary tension. He argued that on one hand, organizations’ main aim is to control the hard (physical) and the soft (human) side of production to achieve organizational goals. On the other hand, the workers who are directly involved in production have different interests as they are the non-owner of the organization. This conflicting situation is called the primary tension. To manage this primary tension, organizations formulate written rules and regulations, and appoint supervisors to align the non-owners to work for the interest of the owners. This process of supervision and tight control is called the secondary tension. In order to manage primary tension, secondary tension is used which actually does not resolve it. Gouldner (1954) described this conflicting nature of bureaucracy as “if bureaucratic rules reduce tensions that emanate from close supervision, they make it less necessary to resolve, and thus, safeguard the tensions that lead to close supervision” (p. 241). This problem of primary tension also resembles the agency problem in which the managers (principals) hire workers (agents) to work for his interests, but only hiring does not necessitate the alignment of the agent and principal’s interests.

Meyer (1972, 1977, 1985) conducted a number of studies in which the author made a clear analysis of bureaucracy in the municipal finance to present two main propositions. First, that there is a need to formulate a formal organization in order to solve the problems of the organizations, and second, that this sort of increased formalization raises rigid bureaucracy. He argued that this situation creates “problem-organization-problem-more organization cycle” which was reflected in the method of gaining control of financial budget in most of the U.S cities. Therefore, bureaucratic control is considered to be the antithesis of the economic system for the states and for efficiency of organizations. He also concluded that formalization eventually creates a number of hierarchies resulting in the centralization of an organization.

The analysis of Gouldner (1964) revealed that there are certain organizations that do not follow bureaucratic rules. The supervisors, according to his observation, also allowed the workers to take in between breaks, not to punch the time cards, to socialize and to relax between the work hours, which completely violates the true essence of bureaucracy. Gouldner (1964) and Joo, Yang and McLean, (2014) believed that by enforcing such rules, one may not gain the cooperation of the worker, but it might be possible otherwise. Therefore, sometimes the supervisors use flexibility in order to get the job done to achieve the organizational goals.

2.1.4 Work to Rule Problem

Managers can face the ‘work-to-rule’ problem while implementing the rigid rules and regulations. The work-to-rule is the attitude of workers, when they only perform tasks that are included in their formal job description (Bunderson, 2003). This discourages the organizational citizenship behavior of the employees at the workplace, which is one of the strongest determinant of employee creativity and performance (Meier & Capers, 2012).

The studies of Blau (1954) and Gouldner (1964) concluded that rigid bureaucracy with its written rules and centralized nature produce mechanical followers and routine-oriented workers which increases the over conformity, resistance to change, no creativity and innovation, and ritualism in the organization. They finally concluded that in a bureaucratic organization, the machinelike rules dominate humans, and humans lack the capabilities and capacity to resist these powers of tight control-humanity is being crusaded in the pursuit of formalization.

Another classic study by Selznick (1957) gave further evidence of the unintended consequences of the rigid rules and regulations in his theory of organization. He argued that delegating responsibility on one hand makes subordinates a machinelike social control, while on the other hand, delegation of power is a way to give autonomy and freedom to employees (Hrist et al, 2011). This bureaucratic delegation of power is self-contradictory. Selznick (1957) called these members of the organization as the “recalcitrant tolls of action”. He further explained that personality traits of these workers are impediments to formal rules that bureaucracy enforces. He suggested that organizations must gain commitment (and not recalcitrant employees) in order to adapt, change and innovate.

2.1.5 Theory of Moral Mazes

One of the well known sociologists Jackall (1988) presented the theory of Moral Mazes in his writing ‘The World of Corporate Managers’. The author argued that humans (employees) can navigate their way through the bureaucratic morass. Furthermore, the author made observations and conducted interviews of managers from large firms like chemical industry, textile units, large conglomerates and some public agencies. After detailed observations and interviews, the author observed that “bureaucratic work causes people to bracket while at work, the moralities that they might hold outside the workplace or that they might adhere to privately and to follow instead the prevailing morality of their particular organizational situation… What matters on a day-to-day basis are the moral rules-in-use fashioned within the personal and structural constraints of one’s organization” (Jackall, 1988, p. 6). Crozier (1964) commented that bureaucracy tends to standardized behaviors of humans at work, which result in the resistance to rules and regulations, and creates a deviating behavior from creativity and innovation.

Most of the above discussed classic studies were conducted in the field of public administration focusing on public manufacturing industry. In the late 1960s, the bureaucratic model of management was adopted by a number of private organizations to control the behaviors of their employees.

2.1.6 Bureaucracy in Management/Administrative Sciences

After the huge success of rational bureaucracy in public administration, it sets its place in the management sciences. The introduction of bureaucracy into business organizations is the direct relation to the theory and practice of management. Among many management gurus, Fayol (1949) is considered to be the first known scholar to present the concept of organizational structure. Fayol became famous for his functional definition of management: “management is a composition of different function, including planning, organizing, commanding, coordinating and controlling”.

Fayol gave these concepts on the basis of his vast experience as a manager and administrator at a mining firm. Bureaucracy was seen in the principals provided by Fayol became the fundamental pillars of organizations in the 19th century. Organizations to maintain effectiveness and efficiency must have specialization of work, position and authority of command, discipline, unity of direction, unity of command, rewards system for each individual, chain of command, equity, career orientation and clear goal setting (Melé & Cantón, 2014).

Mooney and Reiley (1939) have also presented the concepts of bureaucracy into the corporate world. In their work The Principles of Organization (1939), Mooney and Reiley presented the idea of functionalization and hierarchical control in the organization. In the same literature, they discussed the prevailing problems with the implementation of bureaucratic control. They also discussed a management dilemma that organizations, at one hand, strive for the stricter rules and regulation, coordination among the employees, and on the other hand, need to allow some freedom to the employees. For the said purpose, they suggested that managers must have complete knowledge about how to reduce human friction and mechanical variation in the organization. This can develop a strong sense of faith and harmony, and if the common understanding between the employer and employees is developed, it can bring the best form of discipline. Both these scholars gained this perspective on the basis of the experience they had at General Motors as executives (Gormley, 2014).

Simon (1946), a well known management guru, discussed different principles of administration. In his article ‘The Proverbs of Administration’, he argued that for each administrative principle there can be a contradictory principle. For example:

i. The unity of command principle means that there must be one boss from whom the employee should receive orders and directions, while the work specialization principle demands that each individual should make decisions based on his or her special expertise. Therefore, both these principles have a conflicting nature.

ii. Another principle, span of control, means that there must be a small and manageable number of subordinates. This means that if this principle is applied, there will be a number of hierarchical levels in the organization. This multi-level chain of administration can cause communication problems among the levels. This shows a clear contradiction of the two principles.

In Simon’s (1946) view, the administrative theory has failed to understand the contradictory nature and its implememtation. Simon and March (1958) also argued about the concept of bounded rationality. Bureaucracy demands that rules and regulations should be followed with complete accuracy even when making organizational decisions. Simon and March were of the view that human beings have several limitations while making a decision and cannot completely follow the rules and regulation as the organizational formalization demands. Alavi, Matin, Jandaghi and Saeedi (2010) argued that humans are limited to the amount of information they can access and process for decision making, they cannot ascertain all the alternatives, and their predictive ability is also narrow. Therefore, they are unable to follow the absolute nature of bureaucracy in any organization. They concluded through their series of studies that satisfactory decision made by administrative humans is sufficient enough for the effective use of the organizations. In the same context, Beach (2014) identified some more human constraints like, the unwilling nature to make a decision, tendency to make sudden decisions on the basis of incomplete or raw information, and capacity to accept the most availability of short-range solution.

2.1.7 Bureaucracy and its Contrasting Views

The concept of bureaucracy is one of the most focal ideas in organization theory (Perrow, 2002; Shenhav, 1999; Mele & Canton, 2014; Clawson, 1980; Geiser, 2014). In organization philosophy, various research papers and books have leaned towards bureaucracy, both as a theory development and as an object of study. These are the two vital topics in the study of bureaucracy in writing: (1) the prominent part of the worker in bureaucracies and the inability to give sufficient work task, and (2) bureaucracy’s powerlessness to react to natural changes (Perrow, 1986; West, 2015). Various investigations of bureaucratic organizations are stressing on the motivational difficulties as far as distance and fatigue confronting workers in organizations (Crozier, 1964). The noteworthy criticism of bureaucracy literature showed that it creates barriers in the creative and innovative minds (Hrist et al., 2011). In this manner, the present study explores whether bureaucratic organizations stifle creativity and innovation or not.

2.1.8 Components of Organizational Bureaucracy

Max Webber is known for being the founding father of bureaucracy, and according to him it is a “form of organization characterized by (1) division of labor, (2) a clearly defined hierarchy, (3) detailed rules and regulations, and (4) impersonal relationship” (Robbins Cenzo & Coulter, 2013, p. 28). Marshall and Mayer (1971) further elaborated six basic elements of Webber’s Bureaucracy: (1) clearly defined authority, (2) defined structure of the office, (3) written rules and guidelines for expected performance, (4) recruitment of officials on the basis of relevant skills and knowledge, (5) office holding as a career and not as an owner of the organization, and (6) duties based on position or post and not the person. All these elements are meant to specify in order to regulate and manage the activities and behaviors of the humans at work. Based on these views, it is clear that an organization that implements the bureaucratic control is expected to run in the following manners:

i. Employees are recruited and selected on the basis of relevant skills, knowledge and abilities to perform a specific task.

ii. Every worker in the organization is assigned a clear role, having defined duties, authority and responsibility with full accountability of the task assigned.

iii. The duties assigned to a worker are tied to a position, regardless of the person, and these duties are not to be transferred to any other position or a person. Each position has a definite hierarchy in the organizational structure having clear reporting system.

iv. The organization will have written rules and regulations which represent formalization of information that define the task and the rules that are to be followed while performing a particular work.

v. The job is to be taken as a career and not the ownership, having equal responsibility of the assigned work.

vi. All the activities and the behaviors are to be directed towards the achievement of the organizational goals.

The scholarly work on organizational bureaucracy has recognized formalization and centralization as the main conceptions of bureaucratic control in organizations (Hage & Jerald, 1965; Woodman, Sawyer & Griffin, 1993; Hrist et al., 2011; Romero, 2012).

Formalization refers to the degree to which the rules, regulations, laws, policies, task assigned; the evaluation and work procedures are clearly defined in a written form (Hrist et al., 2011). All organizational activities, for instance, how to decide, communicate and act in the organization, reflect formalization in the organization (De Clercq, Dimov & Thongpapanl, 2013). If these procedures and guidelines are written and clearly defined, it is a highly formalized organization, while if these procedures are vaguely defined, then the organization has low formalization. The condition for this documentation is that it should exist before the employee is placed at a certain post or a position in the organization (Demirci, 2013). The formal position that has been given to the employee is shaped up by these written rules and regulations, in terms of organizational behavior, activities, actions and accountability (Hall, Johnson & Haas, 1967).

The formal structures are usually described by organizational charts, which mention the positions of officials from top to bottom and across a level with their reporting systems. These organizational charts are written or graphical representation of the formal structure (Clegg, 2012). The organizational charts also prescribe the formal duties for each position in the organization. These pre-defined duties of the individuals determine the main role and the expected behavior of employees. The famous phrase “the role makes a person” indicates the power of formal structure (Staggenborg, 1988). It means that whoever is holding a position in the hierarchy will also possess the position power of a particular post. If we take the converse phrase, i.e., “the person makes the rule”, it prescribes the non-bureaucratic, informal organizational arrangement (Wei, Yi & Yuan, 2011).

Centralization refers to the extent of decision making at the top level of the organization (yen & Teng, 2013; Van der Voet, 2014). Centralized organizations make all critical decisions at the top level without involving the lower and middle level management (West, 2015). On the contrary, decentralized organizations depend on the contribution of their employees at all levels of the decision making. In centralized organizations, the hierarchy line is very clear and the chain of command is dictated by the top management to the employees at all levels. In centralized organizational structure, the decisions are made on an annual or some periodic basis, which lacks the flexibility of being amended or reviewed (Hill, Martin & Harris, 2000). This rigidity or inflexibility restricts employees to contribute their creative and innovative ideas to the organization (Diaby & Sylwester, 2015).

Instrumentalization means that an organization is like an instrument or a machine, which is designed to perform a particular function and to achieve a specific goal. All the rules, regulations and policy making in the organization must be aligned with the mission of the organization so as to achieve the main goal. Blau and Scott (1962) viewed the concept of instrumentalization as the “means and end model” in which they emphasized that the relationship of task and structure makes the “means” while goals and objectives make the “end” for an organization. This “means and end model” makes bureaucracy a rational organizational instrument (Satkunanandan, 2014).

Rational legal authority is the exercise of power through a formal system. Power is commanded on the basis of the family elder or by the charismatic personality in the traditional organization (Hlavacek & Thompson, 1973; Shenhav, 1999). With the implementation of this third centerpiece of bureaucracy, organizations are bound to exercise the power through formal systems, therefore, legal and documented. Hage and Jerald (1965) argued the rational authority in terms of centralization-the decision making power at different hierarchical levels in the organization.

Bendix (1947), in his landmark study, investigated a problem in the Weber’s views about authority. He observed and suggested that Weber’s bureaucratic authority depicts that power should be possessed by a person having the most relevant competencies in the organization (Ahearne, Mathieu & Rapp, 2005). However, it is obvious from the practical organizational life that we cannot assume that people in power in today’s bureaucratic organizations are the most technically competent. Gouldner and Alvin (1948), the famous sociologist duo, were also of the same view and discussed the conflicting problems that arises from the authority of a bureaucratic structure.

A number of components of bureaucracy have been discussed in the previous literature. However, the most important elements of organizational bureaucracy recognized by the scholars are formalization and centralization.

2.2 Formalization and centralization—The Soul of Bureaucracy

Formalization and centralization are the most important elements of organizational structure which play a significant role in determining how individuals and organizations behave (Tolbert & Hall, 2009). Lee (2010) subdivided organizational structure into different dimensions and concluded that formalization and centralization are the two most important elements of the organizational structure. Burns and Stalker (1967) cited by Sine, Mitsuhashi and Kirsch (2006) also suggested that formalization and centralization are the main pillars of bureaucratic organizational structure.

Ambrose and Schminke (2003) proposed that there are two types of structures of organizations, i.e., mechanistic and organic structures. The mechanistic organizations have rigid formal structure, hierarchy of authority, and formal control systems. The organic organizations, having a less formalization, show flexibility in rules and procedures, continuous adjustments in the rules and regulations, and encourage communication among employees. Lipsky (2010) argued that with the age of an organization, it tends to grow in its rules, make formal control systems, and develop bureaucracies. Based on the prevailing views in literature, it is deduced that formalization and centralization are the two dominant features of today’s bureaucracy (Demirci, 2013). The present research also takes into account these two factors and investigates their impact on employee creativity and organizational innovation.

2.2.1 Formalization

Formalization refers to the rigidity in implementation of policies, procedures and rules in an organization (Juillerat, 2010). Formalization in an organization is reflected by the level of rigidity of rules and regulations, and a number of written documents. The number of policy books, the policy manuals, organizational charts, and formal list of do’s and don’ts are examples of high formalization (Pertusa-Ortega et al., 2010; Alavi et al., 2010). A high formalization in a job restrains one’s freedom and autonomy, and encourages to exhibit predetermined inputs, which suppresses employee’s own contribution towards the job. Pugh et al. (1968) argued that formalized organizations are “mechanistic organizations” in which rules and regulations are rigid, job descriptions are well defined and instructions for communication are clear. On the other hand, Hage (1965) argued that both highly formalized and low formalized organizations have written rules, but the rigidity in their implementation is more important in order to determine the degree of formalization.

Juillerat (2010) argued that formalization has its own advantages and disadvantages for an organization. Formalization makes the behaviors of employees predictive and wh