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Leveraging Resistance to Change and the Skunk Works Model of Innovation

  • Andrea Fosfuri

    (Universidad Carlos III de Madrid)

  • Thomas Rønde

    (Department of Economics, University of Copenhagen)

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    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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    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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    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. Cassiman , Bruno & Ueda, Masako, 2002. "Optimal project rejection and new firm start-ups," IESE Research Papers D/460, IESE Business School.
    3. Juan-José Ganuza & Esther Hauk, 2006. "Allocating Ideas: Horizontal Competition in Tournaments," Journal of Economics & Management Strategy, Wiley Blackwell, vol. 15(3), pages 763-787, 09.
    4. Meyer, Margaret A & Milgrom, Paul & Roberts, Donald John, 1992. "Organizational Prospects, Influence Costs, and Ownership Changes," CEPR Discussion Papers 665, C.E.P.R. Discussion Papers.
    5. Roberto Burguet & Yeon-Koo Che, 2004. "Competitive Procurement with Corruption," RAND Journal of Economics, The RAND Corporation, vol. 35(1), pages 50-68, Spring.
    6. 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.
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