Levers of Control: Impact on Innovation

ABSTRACT Using structural equation modeling, our study provides evidence for the effects of management control systems on innovation performance and knowledge acquisition within organizations. Our proposed model separates (1) dyadic management controls (“one‐to‐one”) from (2) polyvalent management controls (“one‐to‐team”). Within the presented framework, an organization's manager can increase innovation performance on a dyadic level and can stimulate knowledge acquisition on a polyvalent team level. The analyses are based on data collected via an online questionnaire completed by 122 top managers worldwide. Our study shows that knowledge management and management control systems can complement each other. In our case, this is achieved by adapting an absorptive capacity framework. Furthermore, a manager's action can directly affect innovation performance. Managers can make use of the levers of management controls system to steer this effect. Regulative actions by the management are more effective on the individual level with regard to improving innovation performance. Moreover, knowledge acquisition is effectively influenced due to encouraging actions on a polyvalent level. Practical implications indicate that managers need to be aware of both the direct and indirect impact of their actions on innovation performance, be it on a direct dyadic level or an indirect polyvalent level.