What is a learning organization and why is it important? A learning organization can be seen when horizontal interaction and communication within the firm promotes knowledge creation. In today's environment, knowledge becomes obsolete so quickly that business must work continually to attain new competencies. Nielsen and Lundvall state that "a learning economy is thus one in which the ability to attain new competencies is crucial to the economic success of individuals and to the performance of firms, regions and countries."

What do companies gain from "learning"? A rapidly changing environment is not conducive to the once traditional hierarchical organization. Functional flexibility is key in today's businesses. Businesses are changing from a linear form of innovation to a more interactive form of innovation. Strict borders between functions (customers, employees, competition) make a firm inefficient. This puts a growing emphasis on building relationships with suppliers, customers and competition in becoming a double loop learning system.

What is this study based on? Over 2000 Danish firms were surveyed in 1996 and then again in 2001 to establish changes in their business and what traits worked in a positive or negative correlation with those changes. Frequency of product innovation was the dependent variable.

What were some of the key findings?

• First, it was statistically proven that big firms innovate more than small ones.
• 75% of the 100+ firms underwent organizational change
• 40% of firms with less than 50 employees underwent change as well



• Differences between various industries were evident
  • Business services and manufacturing scored very high
  • Construction companies underwent very little change
  • Direct employee participation has a positive effect on the innovativeness of the business and its use of learning concepts

Why did the businesses want to change?

• Two key reasons for change were statistically present
• Increase effectiveness of daily work
• Specific aims (such as:)
  • Renew knowledge
  • Develop new products
  • Adapt to turbulent environments
  • Quality customer service
  • Cooperation

What factors increase a firms "learning" ability? 14 different dimensions were studies and broken down into four factors:

• Integrative and quality work organization (quality circles, cross training, integration, delegation, and self managed groups (i.e.: participation))
• Human development dimension (tailored education and long term education)
• External cooperation (closer cooperation with contractors, customers, etc)
• Compensation systems (wages based on results, etc)

What factors are most significant? Each has a significant factor in innovation, but the first, "Integrative organization" shows the largest. This factor alone doubles the changes for product innovation. The other factors do show a moderate increase in innovation. In addition, the bundling of these factors showed that when firms grow in size, the share of use of these characteristics as well as innovation and development increases as well. One out of five small firms have developed a learning organization where one of every two large firms have. Interestingly, this study, done on Danish businesses, shows a high share of "developed" and "learning, innovative firms" to be foreign companies.

What affect does employee participation have on organizational change?
Identifying two types of participation is necessary:

• Direct involvement: management initiative, through communication and cooperation between employee and management
• Indirect involvement: participation through unions and institutions

Results overwhelming support higher innovation and organizational change in firms using direct contact such as meetings and ad hoc-project groups. Project groups with joined participation of management and employee representatives have the strongest effect on organizational change.

What does this mean to businesses? Businesses in manufacturing and services who are constantly working to be innovative and efficient sometimes become trapped in a fast pace world and forget that learning must become and inherent trait of the whole organization. Failing to include employees and other functions in the organizational decision making process will result in a lack of innovativeness and knowledge.

Businesses should be encouraged to support those traits associated with an "integrated organization", such as employee participation, cross training, quality circles and integration. Larger firms are statically more apt to master some qualities associated with a learning organization, and therefore are more innovative and efficient.

Link to full study