Organizing Knowledge Production Teams within Firms for Innovation

Strategy Science, Forthcoming

INSEAD Working Paper No. 2019/57/EFE

34 Pages Posted: 12 Dec 2019

See all articles by Vikas A. Aggarwal

Vikas A. Aggarwal

INSEAD - Entrepreneurship and Family Enterprise

David H. Hsu

University of Pennsylvania - Management Department

Andy Wu

Harvard Business School (Strategy Unit); University of Pennsylvania, The Wharton School

Date Written: December 11, 2019

Abstract

How should firms organize their pool of inventive human capital for firm-level innovation? While access to diverse knowledge may aid knowledge recombination, which can facilitate innovation, prior literature has focused primarily on one way of achieving that: diversity of inventor-held knowledge within a given knowledge production team (“within-team knowledge diversity”). We introduce the concept of “across-team knowledge diversity,” which captures the distribution of inventor knowledge diversity across production teams, an overlooked dimension of a firm’s internal organization design. We study two contrasting forms of organizing the firm-level knowledge diversity environment in which a firm’s inventors are situated: “diffuse” (high within-team diversity and low across-team diversity) versus “concentrated” (low within-team diversity and high across-team diversity). Using panel data on new biotechnology ventures founded over a 21-year period and followed annually from inception, we find that concentrated structures are associated with higher firm-level innovation quality, and with more equal contributions from their teams (and the opposite for diffuse structures). Our empirical tests of the operative mechanisms point to the importance of within-team coordination costs in diffuse structures and across-team knowledge flows in concentrated knowledge structures. We end with a discussion of implications for future research on organizing for innovation.

Keywords: knowledge recombination, organization design, teams, diversity, innovation, human capital

Suggested Citation

Aggarwal, Vikas A. and Hsu, David H. and Wu, Andy, Organizing Knowledge Production Teams within Firms for Innovation (December 11, 2019). Strategy Science, Forthcoming; INSEAD Working Paper No. 2019/57/EFE. Available at SSRN: https://ssrn.com/abstract=3502246 or http://dx.doi.org/10.2139/ssrn.3502246

Vikas A. Aggarwal (Contact Author)

INSEAD - Entrepreneurship and Family Enterprise ( email )

F-77305 Fontainebleau Cedex
France

David H. Hsu

University of Pennsylvania - Management Department ( email )

The Wharton School
Philadelphia, PA 19104-6370
United States
215-746-0125 (Phone)
215-898-0401 (Fax)

Andy Wu

Harvard Business School (Strategy Unit) ( email )

Harvard Business School
Soldiers Field Road
Boston, MA 02163
United States

HOME PAGE: http://www.hbs.edu/faculty/Pages/profile.aspx?facId=871877

University of Pennsylvania, The Wharton School ( email )

3641 Locust Walk
Philadelphia, PA 19104
United States

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