The Role of Managerial Control in Innovation Processes: an Empirical Analysis among Italian Firms

This paper investigates the link between the Managerial Control System (MCS) and product/service innovation. The aim is to provide an empirical analysis of the role of an MCS in innovation performance and, more specifically, to highlight the characteristics of an MCS that can better support the development of innovation. We refer to the implementation of formal or informal control mechanisms or, with regard to formal mechanisms, to how they are utilized by distinguishing between diagnostic and interactive use. The sample involved in this study consists of 104 Italian manufacturing firms belonging to those sectors of the Italian economy that feature the largest number of registered patents according to the European trend chart on innovation. The results show that an MCS can enhance product/service innovation but it can also inhibit it depending on the role it plays. Indeed, an MCS may hamper innovation if it is limited to pursuing diagnostic functions. Conversely, product/service innovation is positively associated to an interactive use of the MCS. In this case, it is an effective innovation driver capable of stimulating coordination, communication, and learning within innovation teams. The results of this study may have major implications for practitioners. Organizations hoping to enhance their innovation performance should strive to develop an MCS that can blend the monitoring activity with a driver to free thinking and the search for opportunities, while avoiding a strict compliance with rules and regulations, rigid performance evaluation and internal orientation.