Innovating Without Information Constraints: Organizations, Communities, and Innovation When Information Costs Approach Zero

66 Pages Posted: 4 Dec 2013 Last revised: 11 Sep 2014

Elizabeth J. Altman

University of Massachusetts Lowell

Frank Nagle

University of Southern California - Marshall School of Business

Michael Tushman

Harvard University - Organizational Behavior Unit

Date Written: September 10, 2014

Abstract

Innovation traditionally takes place within an organization's boundaries and with selected partners. This Chandlerian approach is rooted in transaction costs, organizational boundaries, and information challenges. Information processing, storage, and communication costs have been an important constraint on innovation and a reason why innovation takes place inside the organization. However, exponential technological progress is dramatically decreasing information constraints, and in many contexts, information costs are approaching zero. We discuss how reduced information costs enable organizations to engage communities of developers, professionals, and users for core innovative activities, frequently through platforms, ecosystems, and incorporating user innovation. We suggest that when information constraints drop dramatically, and the locus of innovation shifts to the larger community, there are profound challenges to the received theory of the firm and to theories of organization and innovation. Specifically, we consider how shifts in information costs affect organizational boundaries, business models, interdependence, leadership, identity, search, and intellectual property.

Keywords: Managing Innovation, Information Costs, Information Constraints, Communities, Organization Boundaries, Technological Progress, Platforms and Ecosystems, User Innovation

Suggested Citation

Altman, Elizabeth J. and Nagle, Frank and Tushman, Michael, Innovating Without Information Constraints: Organizations, Communities, and Innovation When Information Costs Approach Zero (September 10, 2014). Harvard Business School Organizational Behavior Unit Working Paper No. 14-043. Available at SSRN: https://ssrn.com/abstract=2362855 or http://dx.doi.org/10.2139/ssrn.2362855

Elizabeth J. Altman

University of Massachusetts Lowell ( email )

1 University Ave
Lowell, MA 01854
United States

Frank Nagle

University of Southern California - Marshall School of Business ( email )

701 Exposition Blvd
Los Angeles, CA 90089
United States

Michael Tushman (Contact Author)

Harvard University - Organizational Behavior Unit ( email )

Soldiers Field
Boston, MA 02163
United States

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