Monday, January 26, 2015

R&D Production Team Organization and Firm-level Innovation

AGGARWAL Vikas A., HSU David H., WU Andy
Read the working paper
INSEAD Working Paper 2015/03/EFE/ACGRE

How should a firm organize the diversity of technological experience contained within its base of inventors when firm-level innovation output is a key performance consideration? We investigate the innovation implications of alternate firm-level approaches to organizing such diversity. Building on the knowledge-based view and organization design literatures, we examine the effects of across-team and within-team technical experience diversity on firm-level innovation output. Our framework suggests these alternate managerial choices involve trading off knowledge recombination benefits and coordination costs. Using a panel dataset of biotechnology start-ups observed from their founding date onwards, we find that across-team diversity results in greater firm-level innovation benefits as compared to within-team diversity. We also find evidence that collaborative experience and combinatorial novelty moderate this effect, further supporting our proposed framework.