Exploring the Effect of Climate for Creativity on Organizational Innovativeness Nor Hazana Abdullah, Alina Shamsuddin, Eta Wahab and Nor Aziati Hamid Faculty of Technology Management and Business UTHM Johor, Malaysia Abstract—Scholars are in agreement that ‘innovation is the successful implementation of creative ideas within an organization’. This notion implies intricate interconnections between constructs. However, creativity per se would not lead to innovation. It must be coupled with conducive organizational climate to enable successful innovations. Empirical evidence have shown favorable trend towards this direction. Nonetheless, studies on the relationship between climate for creativity and organizational innovation are scarce and fragmented in nature especially in the context of small and medium firms in Malaysia. A face-to face survey was used to collect data from thirty-six Malaysian SMEs using established instruments adopted from Amabile’s KEYS and Wang and Ahmad. Collected data were subjected to data cleaning, editing and transformation prior to data analysis. Both descriptive and inferential statistics were used to describe the data and to test the hypotheses. Process innovation is mostly affected by climate for creativity followed by behavioral, market and product. However, strategic innovation is not affected by climate for creativity. Firms which invested their resources to foster climate for creativity would benefited from higher innovations in various forms. Keywords—Climate for Creativity, Organizational Innovativeness, Small Business. I. INTRODUCTION The importance of creativity and innovation has received substantial attention long before Amabile’s seminal paper in 1983 (e.g. [1]). The zeal to understand the dynamics and complexity in managing innovation is partly attributed to rapid growth of market changes and increased diversity of consumers’ behaviors and needs ([2]). The pivotal role of creativity has been reaffirmed by Khalil [3]who succinctly regards ‘creativity is the engine of innovation’ and in agreement with Amabile [4], who claimed that, both people and environment, affect creativity and eventually innovation. Jain and Triandias [5] assert that a creative environment must permits people to work in areas of their greatest interest, encourage employees to have broad contact with stimulating colleagues, allow moderate risks to be taken , tolerates failures and non-conformity and provides rewards and recognition. Companies such as Glaxo Smithkline [6] and Toshiba [7] value creative ideas from all levels of employees to produce solutions while Sharp marks ‘Sincerity and Creativity’ as their business creed to inculcate organizational values and commitment for being creative among all its employees (http://www.sharpworld.com/corporate/info/philosophy/index. html ). These giant companies have capitalized employees’ creativity to gain competitive advantage In retrospect, creativity and innovation has higher significance among small firms or SMEs since they constitute the largest number of business entities in any country’s economy. Acs and Audretsch [8] [9] found that SMEs are seedbed of innovation and various measures should be taken to further stimulate innovation activities among SMEs. In order to compete with larger firms, SMEs need to comprehend how to become more innovative. It is evident that various scholars are in agreement that creativity is a prerequisite of innovation through climate for creativity. Despite the large theoretical corpus, the empirical studies observing this phenomenon are still lacking. A brief literature scan done covering two major databases (Emerald and Science Direct revealed that from 222,068 hits on the term ‘innovation’, only 1,472 hits are related to creativity. Further scrutiny indicates that less than 10 percent of the related hits are focusing on climate for creativity. Moreover, majority of related studies have been focusing on individual level analysis [e.g 10] and large organizations [11]. Thus, there is a chasm of empirical evidence in this regards. In addition, Klijn and Tomic [12] further argued that there is a need for more empirical studies to validate instruments to determine creativity and this study would contribute to this effort. In terms of practical issues, SMEs in Malaysia have been striving to improve their competitiveness through increased innovation. However, the current statistics based on National Innovation Survey [13] showed that innovation activities among SMEs are still below par. Low innovation level might lead to performance issues. Therefore, understanding what factor would drive innovation activities among SMEs is vital. II. LITERATURE REVIEW A. Organizational Inovativeness Innovation has various definitions based on its root approach. For example, one of the early works on innovation looks at organizational innovation as consisting of product, market and process [14]. Oslo Manual [15], however, defined innovation mainly as on new and significantly improved goods and services and processes On the other hand, Wang and 978-1-4799-4735-5/14/$31.00 © 2014IEEE.