Dedicated exploration projects in multinational corporations: how organizational paradoxes help innovation[1]
Brion, Sébastien
Institut de Recherche en Gestion et Economie (Irege)
Chollet, Barthélemy
Grenoble Ecole de Management
Working Paper
Please do not cite or distribute without permission of the authors.
Summary
The rationale behind dedicated exploration projects is that large companies need specific organizational tools if they want to achieve more than incremental innovations. However, as they try to generate new knowledge, those projects often need specific organizational routines and knowledge search distant from the company’s core, leading to integration challenges. The theory of paradoxes suggests that those tensions between integrative and generative mechanisms take place in four areas: organizing, belonging, learning and performing. However empirical research on how actors successfully deal with those tensions is still scarce. Moreover, little is known about how tensions can also be solved across these four areas in an interdependent manner. To feel this gap, we collected data from 39 actors participating to twelve internal dedicated projects in two industry-leading multinational corporations. We capture tensions throughout their discourses, based on in-depth interviews. Using a fuzzy set qualitative comparative approach, we identify which configurations of integrative and generative mechanisms relate to perceived exploration performance. Results show that, taken separately, each one of the four areas show favorable tensions that are different from those resulting from the study of all the dimensions taken simultaneously. According to these findings, local favorable tensions (at parent organization level for instance) may disappear when we introduce other dimensions (learning tensions for instance). In line with the theory of paradox, our research advocates to use a global and systemic approach of the paradoxical tensions of innovation.
Key words: exploration innovation; theory of paradoxes; fuzzy set, dedicated project;
1. Introduction
Research into the new product development process suggests that an organization’s ability to innovate radically lies in its capacity to deal with contradictory forces that are essential to the innovation process (Sheremata 2002). On the one hand, organizational arrangements must allow project teams to consider many different ideas, consult a wide variety of knowledge sources and function autonomously enough to explore avenues that are truly new compared to the existing knowledge base of the firm. On the other hand, this original knowledge has to be translated into coherent collective actions so that the output can be integrated to and ultimately benefit the mother organization. Consequently, dedicated exploration projects have been pictured has requiring almost by definition specific organizational practices meant to “balance” their autonomy and isolation with enough control and integration. A vivid steam of research has discussed how exactly those contradictory practices can hold together coherently. However, if the argument is that some right configuration must be found (Hill and Birkinshaw, 2008), a clear view of the various ideal types is still missing.
The theory of paradoxes has offered more in-depth thinking into what it means to handle contradictory forces. It suggests that focusing on the “balancing” of forces is misleading. In particular, considering a given trait potentially ranging from low to high (e.g. project team’s autonomy), projects can find themselves on both sides of the continuum either at the same time or in a rotating manner. Moreover, when an emphasis is put on one side of the continuum at some point in the project (e.g.: team isolation is strongly encouraged), it can heavily influence later situations, impeding any other movement on the continuum (e.g.: efforts to improve integration of the team to the rest of the organization prove highly difficult because of a strong shared identity at the team level). In other words, the “forces” are not just contradictory they are also often highly interdependent (Smith and Lewis 2011). Those interdependences cannot be captured if the approach is limited to the notion of “balancing” forces.
Despite the increasing appearance of the concept in organization studies, empirical studies explicitly focused on paradox remain sparse. According to Lewis (2000), one explanation for this scarcity is the inadequacy of traditional approaches for examining tensions based on logic and rationality. Therefore, we rely on a fuzzy set qualitative comparative analysis (fsQCA). This approach allows revealing equifinal configurations, where project performance is reached either by highly paradoxical situations or more conventionally clear-cut organizational modes (e.g.: fully separated projects).
We rely on a field study in two large multinational corporations to provide support to this view. Through the analysis of the discourse of 39 individuals involved in 12 projects, we aim to capture the perceived importance of a series of generative and integrative forces, potentially contradicting one another. An fsQCA reveals that perceived project exploration performance isn’t systematically related to balanced situation. Moreover, we find that when considering all dimensions together, new kinds of paradoxes driving performance appear connecting across areas.
2. Theoretical background
2.1 The paradoxical organizational perspective: dedicated exploration project need to combine both generative and integrative mechanisms
Hill and Birkinshaw (2012; 2008) propose to consider dedicated projects as forms to explore, flexible and more or less integrated into the organization. These structures are defined by more or less separate entities, controlled by a parent company whose mission is to develop new business (Block and MacMillan, 1993). The agility and independence for these dedicated innovation projects allow to break free of the constraints and the inertia of the company to more quickly develop new products or services (Basu and Phelps, 2009). Separation helps favor experimentation and the development of new competences, and buffer from ongoing operations. However, their ability to favor exploration far from the company's routines (Hill & Birkinshaw, 2008) is also a source of great challenge for their success. The higher the distance the knowledge base of the company, the more difficult it is to integrate these projects to mainstream activities and operations (Burgelman and Välikangas, 2005; Chesbrough, 2000). Too much separation between the parent company and dedicated project can lead to failure (Burgers, Jansen, Van den Bosch & Volberda, 2009) and closeness to the routines and knowledge of the parent company increases the chances of durability of these projects (Hill and Birkinshaw, 2008). Hence, a theoretical frame for combining favorable contradictory mechanisms is required. This research, shed new light on some positive contradictory mecanisms can be implemented to foster dedicated innovation project.
In line with this stream of research, Sheremata (2000, 2002) addressed theoretically this issue by identifying the complementary role of diversification mechanisms (centrifugal forces - sources of innovation) and integration mechanisms (centripetal forces - source of speed). In this model, the centrifugal forces are constituted by decentralized problem solving, access to external knowledge (new technologies, new markets) and aim to eliminate anything that may constrain the free flow of information to facilitate learning. Centripetal forces compensate for the risks of dispersion posed by centrifugal forces. The variety and novelty generated by the centrifugal forces can be quickly integrated by the organization. Centripetal forces rely on networks of actors tightly coupled either by frequency of contact, either by the relational proximity. In line with Ancona and Caldwell (1992), the central position in the network and experience of the project manager plays a critical role to integrate the dispersed information flow. In contrast to Burger et al. (2009) results, the third integration mechanism is based on a formalized process, marked by milestones and regular monitored decisions. The last integration force carries the identity of the project team. This identity is based on a common goal shared by all project stakeholders. The work being merely theoretical, Atuahene-Gima (2003) proposes to test the Sheremata’s model on a representative sample of 103 incremental innovation projects. This author shows that both types of forces appear as determinants of problem solving speed which play a mediating role on the speed of the projects. Thus, the dimensions of the innovation identified by Sheremata (2000; 2002) are relevant for projects of incremental innovations but remains unobserved for exploration innovation projects as originally designed.
This literature bears mainly on new product development projects without taking into account the relationship between the local project and the rest of the organization. But the management of these integrative and generative forces can not be considered only at the project level. Connections are needed between the dedicated exploration project and the parent organization. Gebert and Boerner (1999) and Gebert, Boerner and Kearney (2010) proposed that innovation processes are based on integrative and generative forces which can play in synergy at three meta levels: anthropological, sociological and epistemological. In terms of human behavior (anthropological), autonomy assigned to a unit would advantageously offset by periodic hierarchical control. The idea is to arrange for each force a compensation mechanism to maintain a balance. This "return mechanism" also avoids any kind of drift related to excess organizational arrangements: anarchy caused by excessive autonomy on the one hand, too much rigidity resulting from too strict control, on the other hand. More generally, it is emphasized that the contingent organizational approach has long since integrated the ambivalence of making logical reason together antagonists (Lawrence and Lorsch, 1967). In the management of ambivalence, the perspective is twofold: take advantage of differences (one to help the other) and prevent disruption (one by another). This design echoes Brown and Eisenhardt (1997) study, which combines a high level of decentralization carried by empowered actors in their decisions. At the sociological level Gerbert, Boerner and Kearney (2010) propose the principle of the positive compensation to where potential conflicts are compensated by mechanisms of cohesion and trust. At the epistemological level, the risk of fallback to a known knowledge is balanced by relationships engaged with external sources of knowledge. The strength of this model is to consider that every strategy of opening is offset by a closure strategy that matches it. The opposition between the forces is considered a tension that keeps the system in balance and not as a fashion antithetical management, so unmanageable.
More recently, in line with this positive vision of paradoxical dimensions of innovation, Smith and Lewis (2011) propose a more complete model than Gebert et al. (2010). Anthropological, sociological and epistemological dimensions of the latter, are mainly focused on how to manage the tensions (the "how to") but left aside the question of the purpose (the "what for"). Smith and Lewis (2011) add the performing dimension to complete the dimensions of the “how to” (anthropological as organizing, sociological as team belonging, epistemological as learning and knowledge). In line with Gebert et al. (2010), Smith and Lewis (2011) study tensions into each dimension but also describe interdependent tensions between dimensions, between the « how to » and the « what for » and between the individual level and the project and organizational level. For the authors, paradox is defined as contradictory yet interrelated elements that exist simultaneously and persist over time. Generative and integrative mechanisms can occur at the project level (belonging), at its aim (performing), at the manipulated knowledge (learning)) and at its relationship with the rest of the organization (Organizing). These four dimensions form a cohesive and global canvas of the tensions that may appear during dedicated exploration projects. At the project level, belonging dimension state the opposition of the self and the others. Groups become cohesive, influential and distinctive by valuing the diversity of their members and their interconnections with other groups. Identity (integration) fosters tensions between the individual and the collective and between competing (generative) values, roles, and memberships (Smith and Lewis, 2011). Learning dimension states the possible tension between old and new knowledge to support innovation. Dedicated innovative projects create or bring new external knowledge that needs to be combined with the old knowledge expertise of the parent organization. Learning requires using, critiquing, and often destroying past understandings and practices to construct new and more complicated frames of reference (March, 1991; Lewis, 2000). This new stream of knowledge could be supported by specific team configuration as by organizational arrangements. These organizational arrangements also exhibit tensions. Structural separation needs to be managed to cope with strategic focused of the firm. Separation/integration paradox or autonomy/control tensions also take place when dedicated innovation projects are launched, these include tensions between empowerment and direction (Denison, Hooijberg, & Quinn, 1995), or routine and change (Chatman and Flynn, 2001; Gittell, 2004) ». Finally, exploration project carry contradictory objectives. Hence, performing paradoxes stem from the plurality of stakeholders and result in competing strategies and goals (Smith and Lewis, 2011). Dedicated innovation project can bring new value proposition or business model that challenge the core business. Multiple and competing goal create organizational tension and require top management support.
Given the potentially large number of tensions in the model presented by Smith and Lewis (2011), it seems appropriate to highlight those that are most likely to affect dedicated exploration innovation project.
2.2 Favorable combination of integrative and generative tensions in dedicated innovation project
Smith and Lewis (2011) paradox canvas constitutes a useful model to analyze integrative and generative tensions encountered in the implementation of the dedicated innovation project. For each of the four dimension of the canvas, dedicated exploration literature brings some key elements for identifying favorable combination of integrative and generative tensions.
Organizing tensions in dedicated innovation project
Researchers have also explored a variety of structures for developing innovation and managing the interface with the broader organization (c.f. Burgelman, 1986; O’Connor and DeMartino, 2006; Kelley, 2009). Some organizations choose to separate this activity from the operating mainstream where innovations are allowed to cultivate apart from the pressures and biases of the mainstream organization (Sharma and Crisman, 1999, Tushman and O’Reilly, 1996; O’Reilly and Tushman, 2004). This separation is necessary because the mainstream’s mode of operation is too slow and conservative to allow for the development of highly uncertain and complex projects, which otherwise need a great deal of autonomy (Burgelman and Sayles, 1986; Galbraith, 1982; Kanter, 1989). One problem stems from the high visibility of dedicated exploration project, which makes them vulnerable with too much isolation, explorative innovation activity cannot adequately benefit from the large firm’s resources and its experience (Burgelman and Sayles, 1986). Brion, Mothe and Sabatier (2008) show mixed results of the effect of structural separation on the capacity of the firm to combine exploration and exploitation innovation activities. In a research based on 97 corporates dedicated projects, Thornhill and Amit (2000) also demonstrate ambiguous results of the effect of the level of autonomy on the project performance. In addition, teams may face constraints when they attempt to transfer their projects back into the parent organization (Galbraith, 1982; Kanter, 1989; Spender and Kessler, 1995). Thus, research has developed on how integration can be achieved. Based on survey research on 240 Dutch companies, Burger et al. (2009) found that structural separation of these units should be combined with informal integration mechanisms (like share organizational vision) while using formal integration mechanisms (like formal cross functional interface with the parent organization) in combination with structural differentiation results in organizations composed of conflicting formal architectures and detrimental to project autonomy. More recently, Garrett and Neubaum (2013) find that dedicated project autonomy is pending from two control mechanisms. The first is based on a direct control mechanism, and the second is about indirect dependence mechanism. Top managers can increase the internal project’s dependence by retaining strategic asset. In line with Brown and Eisenhardt (1998), Simon, Hougthon and Gurnay (1999) and Lewis, Welsh, Dehler and Green (2002) research shows that control-autonomy trade-off is requires to dedicated project performance.