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Publications
  • 2015
  • Chapter
  • The Oxford Handbook of Creativity, Innovation, and Entrepreneurship

Innovating without Information Constraints: Organization, Communities, and Innovation when Information Costs Approach Zero

By: Elizabeth J. Altman, Frank Nagle and Michael Tushman
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Abstract

Innovation has traditionally taken place within an organization's boundaries and/or with selected partners. This Chandlerian approach to innovation has been rooted in transaction costs, organizational boundaries, and information processing challenges associated with distant search. Information processing, storage, and communication costs have long been an important constraint on innovation and a reason for innovative activities to take place inside the boundaries of an organization. However, exponential technological progress has led to a dramatic decrease in information constraints. In a range of contexts, information costs approach zero. In this chapter, we discuss how sharply reduced information costs enable organizations to engage with communities of developers, professionals, and users for core innovative activities, frequently through platform-based businesses and ecosystems and by incorporating user innovation. We then examine how this ease of external engagement impacts the organization and its strategic activities. Specifically, we consider how this shift in information processing costs affects organization boundaries, business models, interdependence, leadership, identity, search, and intellectual property. We suggest that much of the received wisdom in these areas of organization theory requires revisiting. We then discuss the implications for an organization's management of innovation and conclude with research opportunities.

Keywords

Knowledge Sharing; Cost; Innovation and Management; Collaborative Innovation and Invention

Citation

Altman, Elizabeth J., Frank Nagle, and Michael Tushman. "Innovating without Information Constraints: Organization, Communities, and Innovation when Information Costs Approach Zero." In The Oxford Handbook of Creativity, Innovation, and Entrepreneurship, edited by Christina E. Shalley, Michael A. Hitt, and Jing Zhou, 353–379. Oxford University Press, 2015.
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About The Authors

Frank Nagle

Strategy
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Michael L. Tushman

Organizational Behavior
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More from the Authors
  • Senior Team Emotional Dynamics and Strategic Decision Making at a Platform Transition By: Timo O. Vuori and Michael L. Tushman
  • Reimagining Enel: Enabling Sustainable Progress By: Michael L. Tushman and Kerry Herman
  • Note on Cyberattacks and Regulatory Regimes By: Frank Nagle, George A. Riedel, William R. Kerr and David Lane
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