Structural Recombination and Innovation: Unlocking Intraorganizational Knowledge Synergy through Structural Change

This paper examines how structural recombination of business units within a firm impacts subsequent firm innovation. We argue that structural recombination is both a means for firms to unlock the potential for intraorganizational knowledge recombination and a source of disruption to the firm's existing knowledge resources, so that the overall effect of structural recombination on innovation will depend on the balance between these two effects. Structural recombination will have a positive effect on innovation where there are substantial intraorganizational knowledge synergies, where path dependence is low, and where knowledge resources are of high quality, limiting disruption. Results from a 20-year panel of 71 firms operating in the U.S. medical sector confirm these arguments. The study thus provides a contingent view of the effects of structural recombination on firm innovation while highlighting the role of structural recombination in realizing untapped knowledge synergies within the firm.

[1]  Danny Miller,et al.  Evolution And Revolution: A Quantum View Of Structural Change In Organizations , 1982 .

[2]  Justin J. P. Jansen,et al.  Managing Potential and Realized Absorptive Capacity: How Do Organizational Antecedents Matter? , 2005 .

[3]  W. Mitchell,et al.  Resource redeployment following horizontal acquisitions in Europe and North America, 1988-1992 , 1998 .

[4]  Giovanni Gavetti,et al.  Capabilities, cognition, and inertia: evidence from digital imaging , 2000 .

[5]  Bronwyn H Hall,et al.  Market value and patent citations , 2005 .

[6]  G. Hoetker.  The use of logit and probit models in strategic management research: Critical issues , 2007 .

[7]  L. Fleming,et al.  Collaborative Brokerage, Generative Creativity, and Creative Success , 2007 .

[8]  S. Karim.  Modularity in Organizational Structure: The Reconfiguration of Internally Developed and Acquired Business Units , 2006 .

[9]  Daniel A. Levinthal,et al.  The myopia of learning , 1993 .

[10]  I. Nonaka.  A Dynamic Theory of Organizational Knowledge Creation , 1994 .

[11]  Michael A. Hitt,et al.  MARKET REACTIONS TO ANNOUNCEMENTS OF CORPORATE DOWNSIZING ACTIONS AND IMPLEMENTATION STRATEGIES , 2004 .

[12]  Boyan Jovanovic,et al.  General Purpose Technologies , 2005 .

[13]  Lee Fleming,et al.  Special Issue on Design and Development: Recombinant Uncertainty in Technological Search , 2001, Manag. Sci..

[14]  Steven Postrel,et al.  Shared knowledge, “glitches,” and product development performance , 1999 .

[15]  D. Leonard-Barton.  CORE CAPABILITIES AND CORE RIGIDITIES: A PARADOX IN MANAGING NEW PRODUCT DEVELOPMENT , 1992 .

[16]  Atul Nerkar,et al.  Old Is Gold? The Value of Temporal Exploration in the Creation of New Knowledge , 2003, Manag. Sci..

[17]  Ray Reagans,et al.  Bridging the Knowledge Gap: The Influence of Strong Ties, Network Cohesion, and Network Range on the Transfer of Knowledge Between Organizational Units , 2012 .

[18]  B. Kogut,et al.  Knowledge of the Firm, Combinative Capabilities, and the Replication of Technology , 1992 .

[19]  F. Malerba,et al.  Knowledge-relatedness in firm technological diversification , 2003 .

[20]  Pier Paolo Saviotti,et al.  Coherence of the Knowledge Base and the Firm's Innovative Performance: Evidence from the U.S. Pharmaceutical Industry , 2005 .

[21]  Z. Griliches.  Patent Statistics as Economic Indicators: a Survey , 1990 .

[22]  R. Grant.  Toward a Knowledge-Based Theory of the Firm,” Strategic Management Journal (17), pp. , 1996 .

[23]  D. Dougherty.  Interpretive Barriers to Successful Product Innovation in Large Firms , 1992 .

[24]  Daniel A. Levinthal,et al.  Looking Forward and Looking Backward: Cognitive and Experiential Search , 2000 .

[25]  J. March,et al.  A Behavioral Theory of the Firm , 1964 .

[26]  Georg Schreyögg,et al.  Organizational Path Dependence: Opening the Black Box , 2009 .

[27]  Deepak K. Datta,et al.  Dumb and Dumber: The Impact of Downsizing on Firm Performance as Moderated by Industry Conditions , 2008, Organ. Sci..

[28]  J. Liebeskind,et al.  Knowledge, Strategy, and the Theory of the Firm , 1996 .

[29]  B. Kogut,et al.  What Firms Do? Coordination, Identity, and Learning , 1996 .

[30]  R. Garud,et al.  TRANSFORMATIVE CAPACITY: CONTINUAL STRUCTURING BY INTERTEMPORAL TECHNOLOGY TRANSFER , 1994 .

[31]  Wenpin Tsai.  Social Structure of Coopetition Within a Multiunit Organization: Coordination, Competition, and Intraorganizational Knowledge Sharing , 2002 .

[32]  B. Kogut,et al.  Knowledge and the Speed of the Transfer and Imitation of Organizational Capabilities: An Empirical Test , 1995 .

[33]  Samina Karim,et al.  Exploring structural embeddedness of product market activities and resources within business units , 2012 .

[34]  Constance E. Helfat,et al.  Evolutionary trajectories in petroleum firm R&D , 1994 .

[35]  M. Tushman,et al.  Organizational Transformation as Punctuated Equilibrium: An Empirical Test , 1994 .

[36]  Francisco Polidoro,et al.  A competition-based explanation of collaborative invention within the firm , 2013 .

[37]  J. Orr.  Talking about Machines: An Ethnography of a Modern Job , 1998 .

[38]  Ken G. Smith,et al.  Existing Knowledge, Knowledge Creation Capability, and the Rate of New Product Introduction in High-Technology Firms , 2005 .

[39]  Andrew B. Hargadon,et al.  Technology brokering and innovation in a product development firm. , 1997 .

[40]  Will Mitchell,et al.  Bilateral Resource Redeployment and Capabilities Improvement Following Horizontal Acquisitions , 1998 .

[41]  J. March.  Exploration and exploitation in organizational learning , 1991, STUDI ORGANIZZATIVI.

[42]  W. W. Muir,et al.  Regression Diagnostics: Identifying Influential Data and Sources of Collinearity , 1980 .

[43]  P. Williamson,et al.  Related diversification, core competences and corporate performance , 2007 .

[44]  A. Kaul,et al.  Technology and Corporate Scope: Firm and Rival Innovation as Antecedents of Corporate Transactions , 2012 .

[45]  O. Sorenson,et al.  Science as a Map in Technological Search , 2000 .

[46]  JoAnne Yates,et al.  Life in the Trading Zone: Structuring Coordination Across Boundaries in Postbureaucratic Organizations , 2006, Organ. Sci..

[47]  J. Child.  Organizational Structure, Environment and Performance: The Role of Strategic Choice , 1972 .

[48]  Phanish Puranam,et al.  Integrating Acquired Capabilities: When Structural Integration is (Un)Necessary , 2005 .

[49]  S. Ghoshal,et al.  Social Capital, Intellectual Capital, and the Organizational Advantage , 1998 .

[50]  Mary J. Benner,et al.  ISO 9000 practices and financial performance: A technology coherence perspective , 2008 .

[51]  K. Eisenhardt,et al.  The Evolution of Intracorporate Domains: Divisional Charter Losses in High-Technology, Multidivisional Corporations , 1996 .

[52]  E. Hippel.  Sticky Information and the Locus of Problem Solving: Implications for Innovation , 1994 .

[53]  H. Greve.  A Behavioral Theory of R&D Expenditures and Innovations: Evidence from Shipbuilding , 2003 .

[54]  Teresa M. Amabile,et al.  Changes in the Work Environment for Creativity During Downsizing , 1999 .

[55]  H. Greve.  Performance, Aspirations, and Risky Organizational Change , 1998 .

[56]  J. March,et al.  Adaptation as Information Restriction: The Hot Stove Effect , 2001 .

[57]  Wenpin Tsai.  Knowledge Transfer in Intraorganizational Networks: Effects of Network Position and Absorptive Capacity on Business Unit Innovation and Performance , 2001 .

[58]  Will Mitchell,et al.  Innovating Through Acquisition and Internal Development: A Quarter-Century of Boundary Evolution at Johnson & Johnson , 2004 .

[59]  S. Winter,et al.  Understanding corporate coherence: Theory and evidence , 1994 .

[60]  Lotte S. Luscher,et al.  Organizational Change and Managerial Sensemaking: Working Through Paradox , 2008 .

[61]  J. Brown,et al.  Knowledge and Organization: A Social-Practice Perspective , 2001 .

[62]  K. Eisenhardt,et al.  The Art of Continuous Change : Linking Complexity Theory and Time-Paced Evolution in Relentlessly Shifting Organizations , 1997 .

[63]  Toby E. Stuart,et al.  Local search and the evolution of technological capabilities , 2007 .

[64]  Curba Morris Lampert,et al.  Entrepreneurship in the large corporation: a longitudinal study of how established firms create breakthrough inventions , 2001 .

[65]  R. Katila,et al.  Something Old, Something New: A Longitudinal Study of Search Behavior and New Product Introduction , 2002 .

[66]  Laura B. Cardinal,et al.  Corporate diversification and innovative efficiency an empirical study , 1995 .

[67]  Daniel A. Levinthal,et al.  ABSORPTIVE CAPACITY: A NEW PERSPECTIVE ON LEARNING AND INNOVATION , 1990 .

[68]  Laura B. Cardinal,et al.  Internal knowledge generation: the research laboratory and innovative productivity in the pharmaceutical industry , 2000 .

[69]  Daniel A. Levinthal.  Adaptation on rugged landscapes , 1997 .

[70]  William McKinley,et al.  Some Unanticipated Consequences of Organizational Restructuring , 2000 .

[71]  Jeffrey M. Wooldridge,et al.  Solutions Manual and Supplementary Materials for Econometric Analysis of Cross Section and Panel Data , 2003 .

[72]  Raghu Garud,et al.  A Socio-Cognitive Model of Technology Evolution: The Case of Cochlear Implants , 2015 .

[73]  M. Porter.  From Competitive Advantage to Corporate Strategy , 1989 .

[74]  Nicholas Argyres.  CAPABILITIES, TECHNOLOGICAL DIVERSIFICATION AND DIVISIONALIZATION , 1996 .

[75]  Børge Obel,et al.  Strategic organizational diagnosis and design : developing theory for application , 1995 .

[76]  M. Trajtenberg.  A Penny for Your Quotes : Patent Citations and the Value of Innovations , 1990 .

[77]  Marco Iansiti,et al.  Technology integration: Managing technological evolution in a complex environment , 1995 .

[78]  Gregory G. Dess,et al.  Voluntary Turnover, Social Capital, and Organizational Performance , 2001 .

[79]  H. Thomas,et al.  Attitudes Toward Risk and The Risk–Return Paradox: Prospect Theory Explanations , 1988 .

[80]  Morten T. Hansen,et al.  How do multinational companies leverage technological competencies? Moving from single to interdependent explanations , 2004 .

[81]  R. Nelson.  The Role of Knowledge in R&D Efficiency , 1982 .

[82]  B. Silverman,et al.  R&D, ORGANIZATION STRUCTURE, AND THE DEVELOPMENT OF CORPORATE TECHNOLOGICAL KNOWLEDGE , 2004 .

[83]  Nicholas Argyres,et al.  Technology strategy, governance structure and interdivisional coordination , 1995 .

[84]  Gabriel Szulanski.  Exploring internal stickiness: Impediments to the transfer of best practice within the firm , 1996 .

[85]  David A. Belsley,et al.  Conditioning Diagnostics: Collinearity and Weak Data in Regression , 1991 .

[86]  Mooweon Rhee,et al.  Exploration and Exploitation , 2016 .

[87]  C. Fiol.  Consensus, diversity, and learning in organizations. , 1994 .

[88]  Heather Berry.  Global integration and innovation: Multicountry knowledge generation within MNCs , 2014 .

[89]  G. Ahuja.  Collaboration Networks, Structural Holes, and Innovation: A Longitudinal Study , 1998 .

[90]  Michael L. Tushman,et al.  Technical Communication in R & D Laboratories: The Impact of Project Work Characteristics , 1978 .

[91]  E. Johnsen.  Richard M. Cyert & James G. March, A Behavioral Theory of The Firm, Prentice-Hall, Inc., Englewood Cliffs, New Jersey, 1963, 332 s. , 1964 .

[92]  Michael Useem,et al.  When Does Restructuring Improve Economic Performance? , 1999 .

[93]  A. V. D. Ven,et al.  Determinants of Coordination Modes within Organizations , 1976 .

[94]  M. Tushman,et al.  Resource recombinations in the firm: knowledge structures and the potential for schumpeterian innovation , 1998 .

[95]  J. Brown,et al.  Organizational Learning and Communities-of-Practice: Toward a Unified View of Working, Learning, and Innovation , 1991 .

[96]  Paul R. Carlile,et al.  Transferring, Translating, and Transforming: An Integrative Framework for Managing Knowledge Across Boundaries , 2004, Organ. Sci..

[97]  Wenpin Tsai.  Social capital, strategic relatedness and the formation of intraorganizational linkages , 2000 .

[98]  Constance E. Helfat,et al.  INNOVATION OBJECTIVES, KNOWLEDGE SOURCES, AND THE BENEFITS OF BREADTH , 2010 .

[99]  M. Tushman,et al.  External Communication and Project Performance: An Investigation Into the Role of Gatekeepers , 2011 .

[100]  Paul R. Carlile,et al.  Into the black box: the knowledge transformation cycle , 2003, IEEE Engineering Management Review.

[101]  Margaret A. White,et al.  Downsizing in a Learning Organization: Are There Hidden Costs? , 2000 .

[102]  David M. Drukker,et al.  Testing for Serial Correlation in Linear Panel-data Models , 2003 .

[103]  Joel Waldfogel,et al.  Close to You? Bias and Precision in Patent-Based Measures of Technological Proximity , 2007 .

[104]  P. Puranam,et al.  What They Know vs. What They Do: How Acquirers Leverage Technology Acquisitions , 2007 .

[105]  Devi R. Gnyawali,et al.  When Do Relational Resources Matter? Leveraging Portfolio Technological Resources for Breakthrough Innovation , 2011 .

[106]  Laura B. Cardinal,et al.  Balancing and Rebalancing in the Creation and Evolution of Organizational Control , 2004, Organ. Sci..

[107]  Morten T. Hansen,et al.  The Search-Transfer Problem: The Role of Weak Ties in Sharing Knowledge across Organization Subunits , 1999 .

[108]  Samina Karim,et al.  Business Unit Reorganization and Innovation in New Product Markets , 2009, Manag. Sci..

[109]  S. Winter,et al.  An evolutionary theory of economic change , 1983 .

[110]  Paul Almeida,et al.  Learning - by - Hiring: When Is Mobility More Likely to Facilitate Interfirm Knowledge Transfer? , 2003, Manag. Sci..

[111]  Henk W. Volberda,et al.  Co-evolution of Firm Absorptive Capacity and Knowledge Environment: Organizational Forms and Combinative Capabilities , 1999 .

[112]  H. Thomas,et al.  Risk-attitudes and the risk return paradox : prospect theory explanations , 1985 .

[113]  Harbir Singh,et al.  Organizing for Innovation: Managing the Coordination-Autonomy Dilemma in Technology Acquisitions , 2006 .

[114]  Michael L. Tushman,et al.  Competing by design: the power of organizational architecture , 1998 .

[115]  Laura B. Cardinal,et al.  The Use of Knowledge for Technological Innovation Within Diversified Firms , 2007 .

[116]  Erwin Danneels,et al.  THE PROCESS OF TECHNOLOGICAL COMPETENCE LEVERAGING , 2007 .

[117]  Ray Reagans,et al.  Network Structure and Knowledge Transfer: The Effects of Cohesion and Range , 2003 .

[118]  Morten T. Hansen,et al.  Knowledge Networks: Explaining Effective Knowledge Sharing in Multiunit Companies , 2002 .

[119]  A. Nerkar,et al.  Beyond local search: boundary‐spanning, exploration, and impact in the optical disk industry , 2001 .

[120]  Atul Nerkar,et al.  Evolution of R&D Capabilities: The Role of Knowledge Networks Within a Firm , 2005, Manag. Sci..

[121]  Julian Birkinshaw,et al.  Intrafirm Competition and Charter Evolution in the Multibusiness Firm , 2005, Organ. Sci..

[122]  Beth A. Bechky,et al.  When Collections of Creatives Become Creative Collectives: A Field Study of Problem Solving at Work , 2006, Organ. Sci..

[123]  Kathleen M. Eisenhardt,et al.  Architectural Innovation and Modular Corporate Forms , 2001 .

[124]  J. March,et al.  Managerial perspectives on risk and risk taking , 1987 .

[125]  E. H. Bowman,et al.  The Effects of Organizational Downsizing on Product Innovation , 1995 .

[126]  Helen Shapiro.  Engines of Growth , 1994 .

[127]  Laura B. Cardinal,et al.  Organizing for Product Development Across Technological Environments: Performance Trade-offs and Priorities , 2011, Organ. Sci..

[128]  R. Veugelers,et al.  The impact of M&A on the R&D process: An empirical analysis of the role of technological- and market-relatedness , 2005 .

[129]  K. Eisenhardt,et al.  Patching. Restitching business portfolios in dynamic markets. , 1999, Harvard business review.

[130]  Peter J. Lane,et al.  Complementary Technologies, Knowledge Relatedness, and Invention Outcomes in High Technology Mergers and Acquisitions , 2009 .

[131]  R. Grant,et al.  Environments: Organizational Capability as Knowledge Integration , 2022 .

[132]  D. Wellman,et al.  Talking About Machines: An Ethnography of a Modern Job. , 1997 .