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Leveraging Resistance to Change and the Skunk Works Model of Innovation

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  • Andrea Fosfuri

    (Universidad Carlos III de Madrid)

  • Thomas Rønde

    (Department of Economics, University of Copenhagen)

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    Abstract

    We study a situation in which an R&D department promotes the introduction of an innovation that results in costly re-adjustments for a production department. In response, the production department tries to resist change by improving the existing technology. We show that firms balancing the strengths of the two departments perform better. As a negative effect, resistance to change might distort the R&D department’s effort away from radical innovations. The firm can solve this problem by implementing the so-called skunk works model of innovation where the R&D department is isolated from the rest of the organization. Several implications for managing resistance to change and for the optimal design of R&D activities are derived.

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    File URL: http://www.econ.ku.dk/cie/dp/dp_2010/2007-10.pdf/
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    Bibliographic Info

    Paper provided by University of Copenhagen. Department of Economics. Centre for Industrial Economics in its series CIE Discussion Papers with number 2007-10.

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    Length: 22 pages
    Date of creation: Apr 2005
    Date of revision: Jun 2007
    Handle: RePEc:kud:kuieci:2007-10

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    Related research

    Keywords: resistance to change; innovation; skunk works model; contest;

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    1. Yeon-Koo Che & Ian Gale, 2003. "Optimal Design of Research Contests," American Economic Review, American Economic Association, vol. 93(3), pages 646-671, June.
    2. Juan J. Ganuza & Esther Hauk, 2002. "Allocating ideas: Horizontal competition in tournaments," Economics Working Papers 594, Department of Economics and Business, Universitat Pompeu Fabra.
    3. Taylor, Curtis R, 1995. "Digging for Golden Carrots: An Analysis of Research Tournaments," American Economic Review, American Economic Association, vol. 85(4), pages 872-90, September.
    4. Cassiman , Bruno & Ueda, Masako, 2002. "Optimal project rejection and new firm start-ups," IESE Research Papers D/460, IESE Business School.
    5. Meyer, Margaret & Milgrom, Paul & Roberts, John, 1992. "Organizational Prospects, Influence Costs, and Ownership Changes," Journal of Economics & Management Strategy, Wiley Blackwell, vol. 1(1), pages 9-35, Spring.
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