The Impact of Partner Organizational Structure on Innovation

Abstract

Interorganizational partnerships can spur innovation, but their value may be diminished by friction in knowledge flows between firms. We consider how a partner’s organizational structure may influence the knowledge that is accessible via partnerships. We focus on how a partner’s structure trades off localized autonomy for its managers, which facilitates timelier decision making, and unified control, which facilitates integration. By shaping this balance, centralization of decision rights within the partner organization shapes access to its knowledge. Centralized structures generate wide-ranging internal knowledge pathways that enable access to a broader array of a partner’s knowledge. However, the reduced managerial autonomy afforded by centralization makes decision making more cumbersome, which constricts the rate of access to a partner’s knowledge. We find evidence of this tradeoff in the context of corporate venture capital relationships between incumbents and startups in the pharmaceutical industry. An increase in the incumbent’s diversity of knowledge or in the knowledge required by the startup enhances the value of a greater breadth of access, whereas the degree to which the startup can leverage social ties (affinity) or hierarchical fiat (authority) alleviates the costs of a reduced access rate. Each of these features makes an incumbent organization’s centralization more valuable to the startup. By highlighting this tension related to centralization, our findings suggest that new firms striving to maximize their partnership benefits may need to carefully consider their partners’ internal structures.

The inside track: Entrepreneurs' corporate experience and startups' access to incumbent partners' resources

“…This study documents the role such experience can play in enabling startups to navigate external partnerships, which can often be critical to these firms' outcomes (Katila et al, 2021). More broadly, the findings highlight the importance of intrafirm factors in shaping the exchanges and outcomes arising in interfirm relationships, which have received limited attention in prior work (Balachandran & Eklund, 2023).…”

“…Despite these and other limitations, this study represents a meaningful addition to recent work highlighting the importance of intrafirm factors in shaping the exchanges that arise in interfirm relationships (e.g., Balachandran & Eklund, 2023). Classic approaches to examining interfirm relationships adopt monolithic views of firms to examine how their aggregate characteristics, such as their resources and capabilities, affect the formation and performance of interfirm ties.…”

Culturally Informed Technology: Assessing Its Importance in the Transition to Smart Sustainable Cities

“…The social, economic and sustainability benefits of powerful and emerging communications technologies have been shown to vary according to geography and regional culture [49,50], and it has also been shown that smart services have higher rates of adoption when aligned to cultural preferences [29,30]. This stresses the point, already made, that smart sustainable city planners and strategists should prioritise the selection and adaption of culturally aligned technologies, if they are to maximise public acceptance and societal benefit [51,52]. It therefore follows that the potential of smart sustainable city implementation is best understood through the study and analysis of specific urban regions [49,53].…”