Journal Article | Industrial and Corporate Change | October 2010

Organizational Designs and Innovation Streams

by Michael Tushman, Wendy K. Smith, Robert Chapman Wood, George Westerman and Charles A. O'Reilly III

Abstract

This article empirically explores the relations between alternative organizational designs and a firm's ability to explore as well as exploit. We operationalize exploitation and exploration in terms of innovation streams—incremental innovation in existing products as well as architectural and/or discontinuous innovation. Based on in-depth, longitudinal data from 13 business units and 22 innovations, we describe the consequences of organization design choices on innovation outcomes as well as the ongoing performance of existing products. We find that ambidextrous organization designs are relatively more effective in executing innovation streams than functional, cross-functional, and spinout designs. Further, transitions to ambidextrous designs are associated with increased innovation outcomes, while shifts away from ambidextrous designs are associated with decreased innovation outcomes. We describe the nature of ambidextrous organizational designs—their characteristics, underlying processes, and boundary conditions. More broadly, we suggest that the locus of integration and degree of structural differentiation together affect a firm's ability to explore and exploit. We suggest that the senior team's ability to attend to and deal with contradictory internal architectures is a crucial determinant of a firm's ability to exploit in the short-term and explore over time.

Keywords: Competency and Skills; Innovation and Invention; Management Teams; Product Development; Organizational Change and Adaptation; Organizational Culture; Organizational Design; Outcome or Result; Performance Improvement;

Citation:

Tushman, Michael, Wendy K. Smith, Robert Chapman Wood, George Westerman, and Charles A. O'Reilly III. "Organizational Designs and Innovation Streams." Industrial and Corporate Change 19, no. 5 (October 2010): 1331–1366. (doi: 10.1093/icc/dtq040.)