Economies of Scope Through Multi‐Unit Skill Systems: The Organization of Large Design Firms

20 Pages Posted: 10 May 2012

See all articles by Marcela Miozzo

Marcela Miozzo

University of Manchester; University of Manchester - Manchester Business School; University of Manchester - Manchester Institute of Innovation Research; University of Manchester - Manchester Institute of Innovation Research

Mark Lehrer

Suffolk University

Robert J. DeFillippi

affiliation not provided to SSRN

Damian P. Grimshaw

University of Manchester - European Work and Employment Research Centre (EWERC)

Andrea Ordanini

Bocconi University - Department of Marketing

Date Written: June 2012

Abstract

From a study of three large design firms in Italy, the UK and the USA, we derive a distinct model of how large knowledge‐intensive business services (KIBS) firms organize to manage growth and realize economies in ways that differ from the organizational techniques that are familiar from scale and scope studies of large manufacturing enterprises. Case studies were compiled from interviews conducted at the three firms. Large design firms were selected as a contrasting context to Chandlerian manufacturing firms. Design firms were expected to differ from manufacturing firms in terms of strategy, organization and the overall possibilities of achieving economies of scale and scope. Our results show that competitive advantage of these large KIBS design firms derives from a particular multi‐unit skill system that enables the firms to exploit economies of scope. There are four distinctive organizational features of such KIBS firms. First, multiple business units within the firm play a dual role. These are able both to engage in inter‐unit coordination and resource sharing and to attract business independently, often with heterogeneous business models among units. Second, these firms develop formal organizational routines for involving multiple business units in client projects, thus facilitating the migration of clients' business from one unit to another. Third, there is an important role for cross‐unit strategic ‘insight’ agents. Fourth, these firms expand through the founding of specialized, even idiosyncratic, new business units (often with the important role of mastering new technological skills).

Suggested Citation

Miozzo, Marcela and Lehrer, Mark and DeFillippi, Robert J. and Grimshaw, Damian P. and Ordanini, Andrea, Economies of Scope Through Multi‐Unit Skill Systems: The Organization of Large Design Firms (June 2012). British Journal of Management, Vol. 23, Issue 2, pp. 145-164, 2012. Available at SSRN: https://ssrn.com/abstract=2055558 or http://dx.doi.org/10.1111/j.1467-8551.2010.00699.x

Marcela Miozzo (Contact Author)

University of Manchester ( email )

Oxford Road
Manchester, M13 9PL
United Kingdom

University of Manchester - Manchester Business School ( email )

Booth Street West
Manchester, M15 6PB
United Kingdom

University of Manchester - Manchester Institute of Innovation Research ( email )

Booth Street West
Manchester, M15 6PB
United Kingdom

University of Manchester - Manchester Institute of Innovation Research ( email )

Booth Street West
Manchester, M15 6PB
United Kingdom

Mark Lehrer

Suffolk University ( email )

Boston, MA 02108
United States

Robert J. DeFillippi

affiliation not provided to SSRN ( email )

Damian P. Grimshaw

University of Manchester - European Work and Employment Research Centre (EWERC) ( email )

Oxford Road
Manchester M60 1QD, M13 9PL
United Kingdom

Andrea Ordanini

Bocconi University - Department of Marketing ( email )

Via Roentgen 1
Milan, 20136
Italy

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