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Organizing for Innovation in Large Firms

Author

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  • Julian, Birkinshaw

    (London Business School)

  • Fey, Carl

    (Dept. of Business Administration, Stockholm School of Economics)

Abstract

Determining how a firm can best be organized to facilitate innovation is a topic of central importance to managers and academics alike and is thus the focus of this paper. Specifically, this paper focuses on two important components of organizing for innovation: design of R&D resource allocation systems and the use of external sources of technology. The study makes a theoretical contribution by developing the metaphor of the "internal market" as useful mechanism for resource allocation inside the firm. In addition, the research benefits from using a two-phase empirical approach. The first phase consists of four in-depth case studies of HP, ABB, Ericsson, and Xerox's global R&D organizations. For the second phase of the study, a questionnaire was developed to test the study's hypotheses on a sample of 103 large firms. The study's key findings are that increased use of external sources of technology results in increased efficiency, but decreased effectiveness. However, results also indicate that it is always important to perform environmental scanning activities. No strong relationships were observed between the use of internal markets as a resource allocation system and firm performance. The case studies reveal that this lack of relationship is likely because leading firms have learned to develop checks and balances to help overcome the weaknesses that their resource allocation system possesses.

Suggested Citation

  • Julian, Birkinshaw & Fey, Carl, 2000. "Organizing for Innovation in Large Firms," SSE/EFI Working Paper Series in Business Administration 2000:5, Stockholm School of Economics.
  • Handle: RePEc:hhb:hastba:2000_005
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    References listed on IDEAS

    as
    1. David J. TEECE, 2008. "Profiting from technological innovation: Implications for integration, collaboration, licensing and public policy," World Scientific Book Chapters, in: The Transfer And Licensing Of Know-How And Intellectual Property Understanding the Multinational Enterprise in the Modern World, chapter 5, pages 67-87, World Scientific Publishing Co. Pte. Ltd..
    2. David J. Teece, 2008. "Firm organization, industrial structure, and technological innovation," World Scientific Book Chapters, in: The Transfer And Licensing Of Know-How And Intellectual Property Understanding the Multinational Enterprise in the Modern World, chapter 11, pages 265-296, World Scientific Publishing Co. Pte. Ltd..
    3. John Hagedoorn & Rajneesh Narula, "undated". "Innovating through strategic alliances: moving towards international partnerships and contractual agreements," STEP Report series 199805, The STEP Group, Studies in technology, innovation and economic policy.
    4. Iansiti, Marco, 1997. "From technological potential to product performance: an empirical analysis," Research Policy, Elsevier, vol. 26(3), pages 345-365, October.
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    7. Narula, Rajneesh, 1999. "Choosing between internal and non-internal R&D activities: some technological and economic factors," Research Memorandum 022, Maastricht University, Maastricht Economic Research Institute on Innovation and Technology (MERIT).
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    More about this item

    Keywords

    Internal market; Resource allocation; Research & Development;
    All these keywords.

    JEL classification:

    • O14 - Economic Development, Innovation, Technological Change, and Growth - - Economic Development - - - Industrialization; Manufacturing and Service Industries; Choice of Technology

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