Lecture 8: Organizing for Innovation Flashcards
What are the advantages of larger firms?
= better able to finance
= better able to spread costs of R&D
= enable greater economies of scale and learning effects
= can take up larger scale of risky products
What are the disadvantages of larger firms?
= R&D efficiency might decrease (bc. of managerial control)
= more bureaucratics
= more strategic commitments to current technologies
=> Big firms often find a way to feel small
What are the two characteristics of small firms?
flexible
entrepreneurial
What’s the Formalization Structure?
= The degree to which the firm utilizes rules and procedures to structure the behavior of employees
What is the Standardization Structure?
= The degree to which activities are performed in a uniform matter
-> Facilitates smooth and reliable outcomes, but can stifle innovation
What is the Centralization Structure?
=The degree to which decision-making authority is kept at at the top level
OR
= The degree to which activities are performed at a central location
What is Centralized Authority
= ensures, that projects match firm-wide objectives
= may be better at making bold changes
What is Centralized Activity
= avoid redundancy (Unnützbarkeit?)
= maximize economies of scale
= facilitate fim-wide deployment of innovations
Disadvantages of central authority and activity
= does not encourage diverse skills and resources
= Projects might not fit the other divisions or markets
What’s the Mechanistic Structure?
= high formalization and decentralization
= good for operational efficiency and reliability
= minimize variation -> may stifle innovation
What is the Organic Structure?
= low formalization and standardization
-> “free-flowing”
= Encourages creativity and experimentation
= May yield low consistency and reliability in manufacturing
What are loosely coupled organizations?
= activities are not tightly integrated
= achieve coordination through adherence to shared objects and standards
= Modular products can enable the use of modular/loosely coupled organizations
= less need for integration -> more flexible configurations, specialize in a few activities and outsource the others
= Results: in a network of loosely coupled firms or divisions of firms
= Not good when very close coordination is needed, or when there is a high potential of conflict
What’s the main challenge for multinational companies?
= Centralization vs. decentralization
= Foreign markets offer diverse resources and have diverse needs
= Innovation tailored to one market might not fit other ones
