large firms
advantage:
1. Greater economies of scale and learning effects
2. Taking on large scale or risky projects
disadvantage:
1. R&D efficiency might decrease due to loss of managerial control
2. Large firms have more bureaucratic inertia
3. More strategic commitments tie firm to current technologies
small firms often considered more flexible and entrepreneurial
big firms can feel samll by:
1. Break overall firm into several subunits
2. Can utilize different culture and controls in different units
Structural Dimensions of the Firm
1. Formalization: The degree to which the firm utilizes rules and procedures to structure the behavior of employees.
2. Standardization: The degree to which activities are performed in a uniform manner.
3. Centralization: The degree to which decision-making authority is kept at top levels of the firm OR the degree to which activities are performed at a central location.
• Centralized authority ensures projects match firm-wide objectives, and may be better at making bold changes in overall direction.
• Centralized activities avoid redundancy, maximize economies of scale, and facilitate firm-wide deployment of innovations.
• But, centralized authority and activities might not tap diverse skills and resources, and projects may not closely fit needs of divisions or markets.
Mechanistic versus Organic Structures
Mechanistic Structures have high formalization and standardization.
• Good for operational efficiency, reliability.
• Minimizes variation , may stifle creativity
Organic structures have low formalization and standardization;described as “free flowing”
• Encourages creativity and experimentation
• May yield low consistency and reliability in manufacturing.
Modular products can enable (though do not necessitate) the use of modular organizations – more typically termed “loosely coupled”
multinational innovation strategies
1. Center-for-global: all R&D activities centralized a single hub
•Tight coordination, economies of scale, avoids redundancy, develops core competencies, standardizes and implements innovations throughout firm.
2. Local-for-local: each division does own R&D for local market
•Accesses diverse resources, customizes products for local needs.
3. Locally leveraged: each division does own R&D, but firm attempts to leverage most creative ideas across company.
•Accesses diverse resources, customizes products for local needs, improve diffusion of innovation throughout firm and markets.
4. Globally linked: Decentralized R&D labs but each plays a different role in firm’s strategy and are coordinated centrally.
•Accesses diverse resources, improve diffusion of innovation throughout firm and markets, may help develop core competencies.