Organization Structure of Development and Firm Innovation
Strategy & Business Policy
Speaker: Paola Criscuolo
Professor at Imperial College London
Research and development have different goals and present different challenges, and their organizational structure might have a differential impact on company’s innovation outcomes. However, previous research on the effect of organization structure on firms’ innovative outcomes has not distinguished between these two activities and the predictions and findings of prior studies are less applicable to development than to research. Drawing on the literature on organization structure and coordination, we articulate mechanisms through which organization structure of development influences innovation. Specifically, we argue that centralization of development restricts autonomy of business units in pursuing proprietary development projects and aggregates all information on development requirements of business units into a central, specialized development unit. These two mechanisms in turn help firms coordinate substitutable development activities and reduce duplications. However, in doing so, centralization of development hampers coordination of development with complementary activities performed by business units such as marketing and manufacturing, which negatively affects adaptation of development outcomes to business-specific requirements. We test the hypotheses using a unique dataset which comprises all inventions submitted to a global ICT company where organization structure governing development activities shifted from a decentralized structure to a centralized one. We conclude by discussing our study’s contributions to the research on R&D organization structure, corporate strategy, and product platforms.