Innovating How to Innovate: Evolutionary Model of Dynamic R&D Paths with Shifting Loci of Innovation
Until recently, the prevailing consensus among various streams of theoretical and empirical literature in strategy, economics and organizational theory has been that innovation does and should take place within the boundaries of the firm. However, growing empirical evidence and emergent theoretical work suggests that the locus of innovation is shifting beyond the boundaries of the firm. A growing number of organizations currently experiment with changing and opening the boundaries of their R&D processes to various degrees. As a result, the complexity of managing R&D systems has increased and our theoretical models and terminology are inadequate. This paper suggests an organizational evolutionary model that captures the changing organizational boundaries of innovation. The analysis suggests the conditions in which organizations will close or open of these boundaries. For each phase of the innovation process—variation, selection, and retention—we identify the drivers shifting the loci of innovation. We suggest that task decomposition is a critical strategic capability and a choice that determines the boundaries of the innovation process. We build on the existing knowledge theory of the firm and the evolutionary perspective streams of literature with extended examples from Apple, NASA, and IBM. The resulting model captures the rising complexity of managing R&D in organizations across various boundary modes and has important implications for organizational boundaries, capabilities, design, and identity.
Keywords: managing innovation;
Evolutionary Perspective on Strategic Management;
Innovation and Management;