SSE/EFI Working Paper Series in Business Administration
Organizing for Innovation in Large Firms
() and Carl Fey
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.
Keywords: Internal market; Resource allocation; Research & Development; (follow links to similar papers)
JEL-Codes: O14; (follow links to similar papers)
31 pages, April 19, 2000
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