Structuring for Innovation

Int. J. Business Excellence, Vol. 4, No. 5, 2011 595

Copyright © 2011 Inderscience Enterprises Ltd.

Structuring for innovation – a review

Sayan Banerjee* PGP Hostel 1 & 2, Room No. 128, NITIE, Vihar Lake, Mumbai – 400 087, India E-mail: [email protected] E-mail: [email protected] *Corresponding author

D.K. Srivastava NITIE, Vihar Lake, Mumbai – 400 087, India E-mail: [email protected]

Rakesh D. Raut PGP Hostel 1 & 2, Room No. 114, NITIE, Vihar Lake, Mumbai – 400 087, India E-mail: [email protected] E-mail: [email protected]

Abstract: The paper deals with the fact that organisational structures are omnipotent in shaping the innovation activities of the organisation and structure along with culture is intricately related with the way innovation is managed or implemented in any organisation. This paper has dealt extensively in understanding the two modes of governance that of organic and mechanistic and their interplaying role in shaping the ultimate innovative activity. The review has been extensive including papers from 1952 to 1997 with a concluding paragraph consisting of a brief summary, and some discussions of the review. From 1996 to 2010, a new trend to differentiate innovation has come, namely aspects like ‘exploitative innovations’; ‘exploratory innovations’; etc. are extensively dealt with in innovation literature which in turn gives rise to new organisational structures. This paper has also included those papers from 1995 to 2010 which deals with these new categorisation, new dimensions of innovation which were previously unexplored. This review can be a reference for researchers in the area of organisational studies.

Keywords: organisational structure; organic; mechanistic; innovation.

Reference to this paper should be made as follows: Banerjee, S. Srivastava, D.K. and Raut, R.D. (2011) ‘Structuring for innovation – a review’, Int. J. Business Excellence, Vol. 4, No. 5, pp.595–620.

Biographical notes: Sayan Banerjee holds a BSc in Chemistry and a Post Graduate in Personnel Management from Pune University. He is pursuing his Research Fellow (PhD) programme at the National Institute of Industrial Engineering (NITIE) in the area of organisational studies. He has quite a few publications in international journals and conferences and his research interests are in areas such as innovation, organisational structuring and design of organisations.

596 S. Banerjee et al.

Dinesh K. Srivastava is working as a Professor (OB/HRM) at the National Institute of Industrial Engineering (NITIE), Mumbai. He received his Master’s in Psychology from the University of Allahabad and his PhD in the area of Organisational Behaviour from IIT, Bombay. He has been teaching post-graduate courses in the area of organisational behaviour. He has published a book entitled Strategies for Performance Management. His research interests include organisational structure, job attitudes and performance management.

Rakesh D. Raut is a graduate of Production Engineering and holds a Post Graduate in Mechanical Engineering from Nagpur University. He is pursuing his Research Fellow (PhD) programme at National Institute of Industrial Engineering (NITIE) in the area of supply chain management. He has participated in international conferences for presenting papers and has published four papers at an international conference held at IIMA and IIT Madras. His research interests are in the areas of supply chain strategies, vendor management inventory and supplier selection strategy.

1 Introduction

The process of globalisation, technological change and intensification of international competition has produced a series of changes, in the organisational forms which are well established in the literature. This includes the delivering of the organisation, the greater use of techniques such as total quality management (TQM), quality control (QC), team work etc. All these things are leading to a more wide spread adoption of information technology and multi-tasking, improved communication centre systems and more participatory form of management (Ezammal et al., 1996).

A firm’s strategies, structure and cultures embody the purposes and goals of the organisation and reflect the values and commitments of a dominant group of managers (Miller and Friesen, 1983). As a result, many aspects of a firm are orchestrated by a core theme into a unified gestalt or organisations actions and decisions towards innovation. Dominant themes in innovative firms are invention and pioneering, (Miller and Friesen, 1983). These are the primary goals of the leaders of these firms who then centre their strategies on product novelty and technological sophistication (Miller and Friesen, 1983). This focus on innovation is likely to have an impact on organisational structure; flexible structures facilitate the development and implementation of new ideas and firms with this flexibility tend to be better at innovating than rigidly structured firms (Utterback, 1979; Pierce and Delbecq, 1977). Innovativeness encourages and empowers idea persons and also assists in brain storming. Leaders are risk takers willing to explore more chancy opportunities. Collectively, the strategic posture and structure of the organisation establishes the central strengths and weaknesses – and determines the organisational level of innovativeness.

Such increased environmental dynamism, increases the need for innovativeness the ability of a firm to introduce new products and processes in order to capitalise on market opportunity (Miller and Friesen, 1983). Since innovativeness seems to be an important factor in today’s market place, it is of interest to determine the organisational and environmental factors associated with it. Thus the present scenario has yielded certain pertinent questions (Miller and Friesen, 1983).

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What leads firms to be more innovative than others? Do firms adopt flexible structure to be able to cope better with industry environments that are perceived as highly hostile or volatile (Ozsomer et al., 1997; Mors, 2010)? Does a hostile industry environment lead a firm to take on more risky product development activities or to stay ‘close to home’ (Ozsomer et al., 1997)? In particular, are the more flexible risk taking firms better equipped to take advantage of rapidly opening strategic windows of opportunity (Ozsomer et al., 1997)? That is, does their strategic posture or organisational structure actually improve their response time to industry change, leading to greater innovativeness (Ozsomer et al., 1997)? These questions are to be addressed by the modern management researcher for existence of business units (Ozsomer et al., 1997). Many innovation researchers have also turned to network analysis to address questions about the innovation process because it is highly dependent upon the flow of ideas, information and skills that create new combinations of knowledge and technology (Collins, 1974; Freeman, 1991; Macdonald, 1998; Burt, 2004; Mors, 2010). Only those papers were exclusively selected which had dealt with innovation or with organisational structures or both.

The objectives of this research paper are:

1 to do an extensive review in the area of structuring for innovation

2 to find out research gaps in the area concerning structuring for innovation, this can be developed into a viable research.

1.1 Inclusion of these variables: a research perspective

From a research perspective, it can be said that the single most important variable in market driven, oligopolistic economy, is the ability to take structured decisions, and reducing the level of uncertainty so as to ensure maximum flexibility. Organisational designing and its proper implementation are absolutely needed for proper innovation initiative. The decision making structures vary based on sets of unique variables encompassing all areas from market competition to mode of product developed.

1.2 Linkage between structures and innovation

There are a number of explanations for a relationship between organisation structure and innovation type, though the two most prominent involve strategy and power. Chandler (1962) showed that the firm, which hopes to survive and enjoy competitive success over time, should adopt an organisational structure that matches and facilitates its strategy. In addition, his observations of the development of the multi divisional form, with its new approaches to assigning authority responsibility and communication, qualify as a type of innovation in the management core of the firm, establishing a link between strategy, structure and the adoption of innovation. Porter (1980) argued that a key aspect of realising a low cost business strategy rests with the firm’s ability to reduce costs through process innovation, while a differentiating strategy depends on the firm’s ability to generate totally new product ideas or new combination of features in existing products. While debate continues as to which organisational form matches which type of innovation, it is clear that some of the relationships between structure and innovation exists due to a relationship between strategic intent and innovation type. A second reason given is that innovation type may vary with organisational structure because of the


presence of the relative power hubs within the organisation. Daft’s (1978) dual core model of innovation suggests technological innovation flourishes in organisations or their sub-units where organic structures exist, while more mechanistic (bureaucratic) forms promote administrative innovation. Administrative innovations include changes that affect the policies, allocation of resources, and other factors associated with the social structure of the organisation and originate with professional managers (Daft, 1978). Technological innovations represents adoption of an idea that directly influences the basic output processes of the firm and often originate with technical specialists ,such as engineers and those trained in the hard sciences (Daft, 1978). Since innovation type in a general sense is related to the professional orientation of the innovator, the organisations that are dominated by people of one orientation or the other should be more prone to particular types of innovation (Kimberly and Evanisko, 1981; Leonard-Barton, 1985).

A key role of management is to deploy resources available to the firm in a way that it minimises the impact of environmental threats. Through its strategic posture, a firm selects and interprets its environment, responds to those elements it considers fixed, and adapts its strategy to the requirements of the environment (Bourgeoies, 1985; Porter, 1980, 1985). A firm can choose an aggressive ,proactive posture, or a passive reactive one. In broad terms, an aggressive strategic posture is marked by strong emphasis on technological leadership, radical new product innovations (as opposed to close-to-home line extensions), and a preference for high-risk, high-potential-reward projects over ‘safer’ projects on the part of management (Covin and Slevin, 1988). In the personal computer industry, for example, Apple purses a proactive strategy with the objective of being the technological leader in the industry. The firm should adapt not only its objective posture to the environment, but also its organisational structure. Structure is defined as capturing centralisation of authority, formalisation, complexity and integration.

Researchers have identified a number of organisational correlates of innovation, including organisational structure, market structure, institutionalised expectations, organisational determinants, organisational climate and leadership. Among these, organisational structure plays a conspicuous role, explaining as much as 60% of the variation in the adoption of innovation in organisations (Kimberly and Evanisko, 1981). Even though investigators concur on some of issues about innovation, a defining characteristic of innovation research seems to be the lack of consensus as to which aspects of organisational structure (e.g., centralisation, structure, etc.) correlate with innovation, especially in terms of the degree and direction of these correlations (Damanpour, 1988). Certainly, the sheer complexity of the innovation phenomenon contributes in large part to the aforementioned confusion (Van de Ven, 1986), but two key contributors to the controversy include a failure to adequately define what is meant by innovation and under-specification of the innovation model.

Previous work into the adoption of innovation has revealed numerous dimensions regarding innovation. While others may exist, the most prominent innovation dimensions (with regard to organisational structure) are radical, incremental, product, process, administrative and technological (Utterback, 1979).

Research into the structural correlates each dimension of innovation remains largely inconclusive, giving rise to the question whether to treat various types of innovation as completely different phenomena, or as different dimensions of a more complex process/event. It can be said that innovation exists as a multidimensional concept, and just as failing to define terms contribute to misunderstandings about the organisational


correlates of innovation, so does under specification of innovation based on its type. Previous studies into the relationship between innovation type and the organisational structure have dealt with the literature and for purposes of clarity; these dimensions will be set in pairs with a summary of findings regarding the comparisons. These include the juxtaposition of radical against incremental innovation, technological versus administrative innovation, and product versus process innovation.

The fact that there are various types of innovation does not in itself merit the interest of managers and researchers. The relevance of the dimensionality issue comes from the interplay between variations in organisational characteristics and the various types of innovation. Research in recent years suggests that structural characteristics of organisations (such as centralisation or size) vary with the type of innovation being adopted (such as process or product innovation) (Daft, 1978; Damanpour, 1991). In other words, the propensity for a firm to adopt innovation is not constant across all sectors. The various characteristics of an organisation interact together with the various dimensions an innovation possesses to determine the probability of innovative adoption. Debate continues however as to what/how organisational characteristics interplay with the various types of innovation.

Regardless of how external uncertainties affect the level of innovation, organisations must be capable of managing an inherently uncertain and ambiguous process to be successful at implementing an innovation based strategy, Van de Ven (1986) and Zaltman et al. (1973) described the innovation process as a complex ambiguous one that requires the management of an extensive net work of personal and group interactions as a new idea moves from conception to implementation. The corporate entrepreneurship and the innovation literature indicate that one method of managing the uncertainties of innovation is through organisational structures. Results generally indicate a link between higher levels of innovation and more organic structures which are characterised by decentralisation, lack of formalisation and higher levels of uncertainty (Burns and Stalker, 1961; Tornatzsky and Klein, 1982).

Given the uncertainties in creating successful innovations, firms following an entrepreneurial strategy cannot afford to rely on only a few innovative projects. They must generate and develop a large number of new ideas to realise even a few successful innovations. A relatively decentralised structure is likely to provide a context in which more ideas are generated than a decentralised one (Burns and Stalker, 1961; Thompson, 1967). Specifically with a decentralised structure competition over resources is less enabling them to initiate and test a great number of creative new ideas that eventually result in a large number of innovations (Kanter, 1983).

Hage and Aiken (1970) and Kim (1980) have operationalised the term decentralisation in terms of the degree of participation in decision making. These studies indicate a positive relationship between innovation and degree of participation in decision making these studies indicate a positive relationship between innovation and degree of participation. The authors conjectured that increased participants commitment to the new deal makes implementation more effective.

In the centralised organisation new ideas must travel on extended chain of command before receiving approval and resource support. Centralised organisations increases the likelihood of promising new ideas screened out or resources denied, thereby reducing the number of innovations successfully adopted (Pierce and Delbecq, 1977).

Recently, He and Wong (2004) mention an explorative innovation strategy to contain ‘technological innovation activities’ targeting new product-market domains and


‘exploitative innovation strategy’ to contain ‘technological innovation activities’ for ameliorating existing product-market. Authors of the strategic management describe exploration, in terms of competence building (Sanchez et al., 1996) or competence definition (Floyd and Lane, 2000), and exploitation, in terms of competence leveraging (Sanchez et al., 1996) or competence deployment (Floyd and Lane, 2000). In many instances, this network research is qualitative but statistical methods are also being deployed to examine the relationship between networks and innovation (Kastelle and Steen, 2010a).

2 Literature review

Definition: For this review paper two variables have been segregated – innovation and organisation structures. Innovation according to some researcher is defined as any newly developed idea, practise or material artefact that is perceived to be new by the early units of adoption or creation, within the relevant environment or as adopting new ideas and artefacts that are applicable to product development for a specific market. A recent definition is defined broadly to include both improved technology and better methods of doing things. Innovation may be manifested in new products and services-improved quality, new ways of production, packaging marketing or distribution, new markets, new organisations or systems and so on.

Then innovation can be summarised as adapting new ideas for product or service development with improved features, quality manufacturing and appreciated aesthetics to meet needs of existing or potential markets in an incremental/radical movement and which may create profit with minimum cost. The word capacity can refer to the volume of innovation over a time line. It does not mean that the shorter the time, the more the output of highly profitable, high value innovation in a sustained manner. On the other hand, the definition of organisational structures is not that complex. At least the ambiguity on the part of researchers in defining organisational structures is a lot less. An organisational structure is defined as capturing centralisation of authority, formalisation, complexity and integration.

2.1 Dimensions of organisational structures

2.1.1 Formalisation

Formalisation: Kanter (1983) and Van de Ven (1986) argued that the uncertain problems characterising innovation are best solved through mutual adjustment and informal information exchange. The intense exchange of information between innovation participants is likely to be facilitated by informal structures that permit innovation team members ready access to needed information or skills (Zaltman et al., 1973). Moreover, no formal procedures or set of rules can guide organisational members in solving the ambiguities of innovation because, by definition, innovation represents a new activity where rules and procedures have not been devised.


2.1.2 Complexity

Van de Ven (1986) noted that innovation is a collective activity requiring a set of diverse skills that are more likely to be found in a complex organisation. Complexity is likely to be associated with increased innovation, by creating an increased pool of diverse ideas generated by specialised personnel. These ideas become sources of potential innovation, (Hage and Aiken, 1970; Wilson, 1966). Although an organic structure (decentralised, informal and complex) is likely to facilitate the process of innovation, it does not explain how the entrepreneurial process is motivated and guided. Structural forms alone cannot solve the ambiguous and unpredictable problems generated by the process of innovation. For example, no rule or procedure exists defining the ‘right’ way to be creative. Furthermore, experience does not necessarily provide managers with guidelines for effective innovation that can be passed on to others. Organic structures can only contribute an internal context that permits the social interaction and information exchange.

2.1.3 Organisational control mechanism

Organisational control mechanisms can be viewed as a system of checks and balances to align the commitments of employees with that of the mission of the parent organisation, Ouchi (1980) described a system of organisational direction and control that might provide such an explanation .They viewed ‘clan’ or cultural control as a way of managing interpersonal transactions in uncertain situations where formal organisational or market controls are absent. Clan control operates through value and belief systems that are imparted to organisational members through various socialisation processes. Reinforcing these systems are implicit rules of behaviour (norms) that define appropriate and inappropriate actions.

In uncertain contexts such as innovation, norms and shared beliefs become the primary source of guidance because formal organisational procedures become ineffective. The relevance of such an implicit control system to an entrepreneurial strategy was illustrated by Weick who viewed strategy as analogous to a map. Strategies, like maps, are effective when they generate purposeful actions in unknown environments. According to Weick, these actions serve to create meaning purpose, and order on ambiguous circumstances by generating outcomes that are rationalised post hoc by organisational participants. In this sense, strategies create self-fulfilling prophecies that define order through organisationally sanctioned action rather than actions being defined a priori through a pre-existing sense of order.

This perspective is especially useful when applied to entrepreneurial strategies that are inherently uncertain because of the nature of innovation. Structured implementation activities are designed and enacted by internal or external change agents to specify usage of innovations and influence users innovation role involvement, their formal (prescribed) and emergent patterns of interactions with and concerning the innovation. Users are individuals (alone or together as work units) who have direct and indirect contact with the innovation in the course of their formal and informal activities within the organisation. The roles of users may be created and defined by the innovation, or some individuals may be interdependent or sequentially dependent on the operation and functioning of the innovation.


It is contended that structured implementation activities and innovation role involvement together make up the two key components of the intra-organisational adoption process and that the former has received far more treatment in the literature than has the latter or their interaction. Organisational structure will be evident in any organisational system and described by characteristics of specific relationships among organisation members. There is ample evidence that organisations structural characteristics are predictive of the initiation and implementation of innovations.

Damanpour’s (1991) meta analysis of the literature reveals that structural variables such as high specialisation, functional differentiation, administrative intensity (high proportion of managers), internal and external communication channels, and low centralisation are significantly related to organisational innovation (both initiation and implementation).

These structural characteristics have implications for a variety of organisation operations and dynamics such as interdependence between sub systems, boundary permeability, as well as the rules and norms embedded in and reinforced by organisational procedures. Organisational structures also must be viewed dynamically (Jablin, 1985; Miller and Friesen, 1980).

Both the life period of the organisation and the stability or instability of an organisation structure plays an important role in the inter-organisational adoption process. For example, the normative decision making procedure for large scale projects should involve the formation of ad hoc committees which will distribute inputs across the functional units. The involvement of management representative in these committees demanded split attention between their own unit’s interest and the administration of the entire project.

2.2 Structured implementation activities

Structured implementation activities are purposefully designed and carried out to introduce users to the innovation and to ensure intended usage. These activities tend to be responsibility of implementers such as human resource personnel, consultants, unit managers, or programme directors. Typically implementation of organisational innovations involve the announcement and articulation of innovations and their goals, training activities to develop user’s task related skills and innovation knowledge development, communication of performance criteria and identification and selection of users.

Their structured implementation activities included development of programme goals, description of the line technician position, selection procedures, training programmes, performance appraisal systems and lastly pay and seniority schedules. The most important of these implementation processes and their structural concomitants were directly related to user’s structuring and modification of innovation. Because their perception and involvement with the programme were also influenced by their own formal and personnel characteristics, these factors are dealt with here subsequently.

2.3 Characteristics of users

The characteristics of users can play an important role in inter-organisational adoption. We distinguish here between formal and personal characteristics of users. Users formal characteristics include hierarchical level, seniority, span of control, (number of reporting


subordinates) job function, formal relationships between users (e.g., authority, reporting and resource exchange relationships) and characteristics of the users organisational unit. Kossek (1989) found that such characteristics determine, in part user’s responses to and involvement with innovation.

2.3.1 Relationship among environment, organisational structural characteristics and SIAS

Researchers have investigated the effectiveness of different implementation tactics and strategies in ringing about innovation process outcomes. Although little insight has been afforded to researchers into how structural characteristics influence the choice and deployment of implementation activities. there is reason to expect that a variety of traditional organisation structure variables, especially specialisation, functional differentiation, administrative intensity, formal communication channels (Damanpour, 1991) as well as decentralisation (Beyer and Trice, 1978) will influence the paths taken in introducing and assimilating formally adopted innovations into users ‘ongoing activities’ (i.e., implementation).

2.3.2 Relationships amongst organisational structure, SIA, users characteristics and users perceptions

Organisational structure influences user’s characteristics and the structured implementation activities. Organisational structure and structured implementation activities (as extensions of organisational structure) impose both formal and emergent sets of relationships among organisational members (e.g., perceptions of organisational goals, commitment to work, skills and expertise.

These relationships have direct implications for the formal characteristics of users (e.g., perceptions of organisational goals, commitment at work, skills and expertise). For example, it was found that organisational members often differed in their perceptions of the goals of the line technician programme – as a function of the level of the hierarchy they occupied and as a function of their increased access to structured implementation activities. Unit managers were much more likely to be more informed concerning the intended goals of the programme, whereas line workers often had only vague notions of the goal.

2.3.3 Organisational information processing theory

Egelhoff (1991) predicts that organisational structures required to deal with information processing requirements are derived from a firm’s environment and tasks. The theory implies that, appropriate organisational fit is achieved when the information processing requirements of the business strategy are met by the information capabilities of the organisational structure. Information processing in organisations is defined according to Egelhoff as including the gathering of data, the transformation of data into information, and the communication and storage of information within the organisation.

Organisational designers according to Weick must recognise that there is no one best way to organise, and any way of organising is not equally effective. The contingency perspective suggests that we should be able to design an organisational structure appropriate for a given multinational's strategy, assuming that strategies “can be


measured in terms of the kind and amount of information processing required to implement them”. Bartlett and Ghoshal (1988) provide a contingency model for designing multinational organisations.

They identified three environmental orientations that can drive the strategic behaviour of multinationals. For each, they predict appropriate management processes, manager mindsets and arrangements of assets and capabilities. In this paper, we will focus primarily on the organisational structures of the models. This limitation refers to our use of the organisational information processing theory as the predictor of the level of information integration across country units.

2.4 Thompson’s model

Thompson (1967) wrote that “uncertainty appears as the fundamental problem for complex organisations and coping with uncertainty, as the essence of the administrative process”. Determined to incorporate uncertainty into his theory of organisations rather than simply ignore it, as so many theorists had done, he proposed a two domain model in which the organisation had a stable core of rational formalised activity and a somewhat uncertain periphery. He associated the core activities with the firm’s rational efficiency seeking activities and associated the boundary spanning activities with its natural uncertainty resolving activities. He contrasted the two modes of governance thereby revealing separable activity domains within the organisational entity – productive activity sheltered by a mantle of uncertainty absorbing boundary-spanning activity.

2.4.1 Organic and mechanistic modes of governance

The contrast between the rational and natural models of organisation is now an abolished part of organisational theory (Scott, 1987). The rational model is defined by its chosen purpose and the deliberate choice of means to that end. These choices are of the organisation and are deliberately detached from the participating individuals concern. The bureaucracy is impersonal and the role occupant is subordinated to the organisations purpose. In the natural system model by contrast, there is little explicit attention to such organisational ends.

The organisation emerges unplanned as individuals converge in their desire and commitment to, have the organisational context of their activities survive as they pursue their personal objectives. Two distinct modes of governance are implied, one bureaucratic the other non-bureaucratic. The first part of the theoretical puzzle has been to describe and explain the non-bureaucratic mode and how it works. In our literature, it is often difficult to distinguish anti-bureaucratic hectoring (e.g., Bennis, 1959) from more descriptive analyses which attempt to isolate the distinguishing features of the non-bureaucratic mode. Thus, Scott (1987) noted that the natural system is a concept that goes far beyond being defined by what it is not, i.e., as a no bureaucracy.

Most natural systems explanations are based on Burns and Stalker’s report of the organic mode which is an empirical description which is suggestive rather than specific. Burns and Stalker (1961) observed a different type of participation, horizontal communication which is advisory rather than authoritarian, together with flexible role definitions and organisational relationships. But this description gives us little understanding of the ‘glue’ that holds such loosely coupled systems together.


The deepest insights into the organic mode come from institutional analysis, with its examination of the tendency for institutions to develop and adapt unbidden (Scott, 1987). The first step is to come to terms with the fact that institutions are social and political entities rather than mechanical and bureaucratic constructions. While institutions are shaped by their participating individuals, and the interplay of their interests, the resulting institution also shapes these individual's consciousness and the meaning they attach to their social activity.

Institutions are thus embracing while bureaucracies are abstract, remote and cold. Within a bureaucracy the locus of control is goal-oriented and exercised by superiors and subordinates acting within defined roles, rather than over the individuals as social actors. As Scott (1987) showed, most writers argue that the organic mode is dependent on shared values and a strong culture. Control is directly over the whole person, who consequently participates directly and personally in the organisation, without that sense of impersonality and detachment which is the hallmark of the bureaucratic mode of governance.

Burns and Stalker, (1961) noted that while the organic mode is not hierarchical in the same way as bureaucratic, it is nevertheless clearly ‘stratified’. The organic mode does not lead to ‘flat’ organisation, with individuals treated as equals. On the contrary, it is highly structured, but in a penetrating, personal and all – encompassing way. Nor is the organic organisation ‘free- floating’ and without direction .It remains a purposive tool in the hands of those who hold power – control and the resources that shape the organisation’s cultural system. We see that the organic mode stands in the same relationship to bureaucracy, as traditional thought stands in relation to rational-legal thought.

Weber argued that traditional thought was still prevalent in those societies which had not yet recognised the power of impersonal scientific knowledge, and the way it could be applied to the design and management of organisations. The prior organisations were clearly ‘institutional’ and, in Weber’s sense, traditional rather than scientific.

Borrowing from others, Scott, (1987) noted that one way to understand the process of institutionalisation is that it infuses an individual’s activity with meaning beyond the technical requirements of the task at hand. Thus, the organic mode reaches beyond the strictly functional definition of the role and involves the individual in the cultural, symbolic and mythical meaning of the organisation’s social activities. This includes its politics and power systems, the participating individuals’ ability to identify with organic organisation’s underlying meanings and purposes, and to see, unbidden, what needs to be done ,that structures the organisation’s otherwise unstructured relationships. Burns and Stalker (1961) who were familiar with the work of Selznick, Whyte, Homans, Gouldner and the other Human Relations theorists were quite specific: “The distinctive feature of the organic system is the pervasiveness of the working organization as an institution”.

The organic mode is institutional in at least three of the respects discussed by Scott (1987); as a system of values, as a system which defines the participants rally, and as a distinct societal sphere. While institutions are emergent in the sense that they come into being without being designed, they shall exhibit internal power differences and stratification. The participants remain under the close control of those with power. The technical problem for institutional analysts is to find out how that power is concentrated and exercised. The problem for organisational analysts is narrower; to find the institutional forces active in the organisation: for authority system.


Burns and Stalker used the term organic to suggest that institutional forces may sometimes be harnessed to further the organisational purpose. In contrast, Roy (1952) reported that employees may harness institutional forces to resist the organisational purpose. But in both the cases the institutional and bureaucratic modes of governance are quite different and operate along quite different loci of control as despite widespread interest in the natural systems model, we know surprisingly little about how to create and control the emerging institutional structures. Yet the possibility that managers can deliberately foster the culture and climate changes which draws employees into an institutional relationship which is effectively aligned with the organisational purpose, is implicit in much of the organisational development (OD) literature. This kind of belief is reflected in the assertion that; “the behaviour of rational person can be controlled … if the value and factual premises upon which he bases his decisions are specified for him”.

The possibility of management controlling both fact and value domains was also explored in their concept of the dual mode of organisation. In practise, the executive task is more complicated because, in addition to the organisational and work group influences, there are many other institutional forces active in the work place. There are for instance, the extra organisational disciplinary commitments of the accountants, engineers and other professionals. Adept managers harness such pre-existing institutional structures rather than risk creating anew. In summary, the organic institutional structures and mechanistic (bureaucratic) structures are quite different. They are not readily compared, they are created and shaped differently, and they impinge on the individual (as social individual and as employee) in many ways that are qualitatively different. They are also managed differently. Yet much of our literature creates the organic and mechanistic modes as poles of a continuum, as there could be a middle ground mode which is half bureaucratic and half organic .Clearly, this is an error.

Burns and Stalker were outlining ideal type’s abstract concepts which could provide a new basis for organisational analysts. If real organisations display both mechanistic and organic attributes it is because they contrive, in their praxis to combine both modes of governance within a single dialectical system. Burns and Stalker and Thompson, argued that the organic mode was the more effective method of organising under conditions of uncertainty. This follows directly since a bureaucracy is coordinated on the basis of knowledge that relates to the achievements of its goals (the purely technical requirements) under conditions of uncertainty, when this goal related knowledge is absent or incomplete, the bureaucratic mode fails.

In the organic mode, institutional forces provide an alternative structure. Thompson (1967) argued that in an organisation whose core is dominated by rational activity, the uncertainties resulting from the organisation’s interaction with an indeterminate and uncertain environment needed to be contained by flexible boundary spanning activities. These speculations were supported empirically where it was confirmed that both modes of governance work well, though only when applied under different circumstances. Thus, we can argue that Thompson extended Burns and Stalker’s concept by nesting the mechanistic domain within an organic boundary spanning domain.

Only Thompson and Duncan have discussed managing the interaction of mechanistic and organic domains in his ambidextrous model, and suggested switching between modes of governance as the situation demanded. He thereby invoked an unspecified and highly problematic meta-rationality, one able to evaluate the uncertainty and switch the organisation into the appropriate mode. Thompson was more direct, suggesting that the


two domains co-existed, but remained isolated except for top managements ‘scheduling activity’ (Thompson, 1967).

Boundary spanning may be organic in its flexibility and adaptiveness, but it is clearly planned and scheduled and still under the control of those who make and monitor such plans. Thompson suggested that central planning adjusted the relationship between the domains. But it was not entirely clear how this was to be done. While the two modes coexist and boundary spanning may protect the core, it can be argued that it must not ever sub ordinate it. In the purposive organisation the institutional and informal structures must always be subordinated to the formal. It is the principal function of the executive to foster the informal system but to so control its co operation with the formal that the organisation’s purposes remain dominant.

The difficulty of balancing the tensions that exist between the need to innovate and the need to produce so that the organisations interests are best served is quite difficult to achieve. The possibility of letting the innovation process gets out of control and so allowing it to detach itself from the organisational purpose always exists. These writers adopted a dual model theory of the organisation and thereby implied a new managerial task in the balancing of the modes. It follows that the nature of the task is a function of the perceived difference between the modes. One might argue that boundary spanning is senior management’s task, and that core activities are subordinated to the organic. Thus senior management need to be ‘generalists’ creative and flexible, rather than rational controllers concerned with rules, details and efficiency.

While referring to the difference between certainty and efficiency-seeking underpinnings of the bureaucratic mode, and the uncertainty resolution which is the essence of the organic mode, it can be argued that the fundamental difference between the modes is that bureaucracy is passive and implies only the application of knowledge. The knowledge necessary to the design and control of the organisations activities is logically prior to the organisational formation. The organic mode, on the other hand supports knowledge generation (KG). It is able to function under conditions of uncertainty. But it also follows that this mode relies on some alternative organisational structure or ‘glue’ which is not contingent on the task related knowledge available. Overall as Thompson suggests, it is seen that in dynamic and uncertain environments, effective organisations are those that synthesise their knowledge application (KA) and knowledge generating activities (KG) activities.

2.5 Structuring for Innovation

Despite its volume and variety, the thrust of the literature on how to manage the various stages of the innovation process is remarkably coherent. It suggests that the early stages are inhibited if there is a formal bureaucratic structure, though it seems more appropriate to formally structure the later stages (Daft, 1982). When properly designed the upstream stages should be formally characterised by the free flow of information, both within the organisation and from without. Close contact with customers and equipment suppliers can be especially important, Potential problem-solvers need intimate exposure to the problems to be solved, Van de Ven (1986) without constraints on their thinking. Similarly there can be arguments for unconstrained project teams able to capitalise on information redundancy with an early phase of variety amplification, followed by later stages of variety reduction and learning. It can be said that 3M’s use of autonomy and personal innovation time facilitated idea generation. Damanpour’s (1991) meta-analysis


of the empirical research into innovation management showed that specialisation; administrative intensity and managerial tenure all enhanced information flow around the organisation and resulted in improved innovation performance.

Downstream activities are considered more susceptible to formal structure. This could be for reasons located within the innovation project or for reasons found in its local organisational environment. As the project proceeds its uncertainties are reduced and the means required to meet its objectives become clearer. Under conditions of uncertainity, its processes are obviously institutional and political; as when the uncertainty is reduced it becomes more technically defined and goal-oriented. This is reflected in the changing communication patterns, in the early stages where there is widespread communications, much of it free-flowing involving informal discussions with professional colleagues outside the host organisation- as the project proceeds however , communication is shifted from those outside the organisation to those within the project who focus on the specific problems that must be solved. Later, communication is refocused again, this time outside the project and toward those who must integrate its output into the parent organisation (Kanter, 1988b). These later communications will be more formalised, reflecting the communicants’ organisational alignments. We see interplay of governance styles during the period between initiation and completion. The gradual shift of mode of governance, as the project moves from the upstream initiation stage to the downstream implementation stage.

Following Hage’s ‘axiomatic’ theory of organisations, which attempted to synthesise the theory of bureaucracy with that of Burns and Stalker’s (1961), it was suggested that there can be a mixed type of governance which would have some characteristics of both modes. This treats the management of the interaction as a structural problem which can be solved by an appropriate organisational design rather than, as in Thompson’s model, as something to be addressed by the central planning system. The principal weakness in the thinking is that the project exists in isolation. It ignores the fact that the project does not interface directly with the market, it is embedded within a host organisation that resources, directs and legitimates the project and its process.

In this paper, Thompson’s line has been followed and argued that both modes of governance must co-exist both in the project and in the background to the project’s specific tasks. We can recall Bower’s multi-level model of the resource allocation process. Bower (1970) argued that there were three conceptually distinct managerial activities: definition, impetus and implementation. The definition activity reflects the host organisation’s selection and determination of the project’s objectives. The impetus activity corresponds to the process of legitimating and researching the project. Implementation is the project’s execution activity. Thus, top management creates the context of legitimacy within which the project takes place but delegates the management of the implementation details to middle management .In the model proposed here, the organisation is at one level, the project is at the other. The project depends on the host organisation.

For the organic mode to be effective and legitimate within the project there must be appropriate institutional structures on which those experiencing the uncertainty of the innovation process can fall back. There must be some glue that holds the project’s system together. Similarly, the appearance of the mechanistic style is evidence of a back ground hierarchical structure which plans resources and controls the project. Thus, the project is really embedded in a dynamic matrix comprising both modes whose impact varies as the project unfolds. The effective project manager is one who synthesise the organic and


mechanistic codes of governance to good effect, knowing when to rely more on the institutional commitments, or alternatively, when to take charge, bureaucratise prepare plans and treat the participants as subordinates.

In this sense, the project manager must be able to synthesise the organic and mechanistic modes within the multi-dimensional constraints of the project. The two modes also interact outside the project, at the organisational level, for we know that the organisations informal structures must be continuously subordinated to the formal structure which reflects its chosen purpose. The goals of the innovation project must be legitimated within the organisation for resources to be allocated. We can distinguish between ‘blue skies’ time in which inventors dream without restriction and unstructured time within a shared sense of what the organisation needs. Despite the institutionalisation of ‘private time’ in 3M and other organisations it is clearly intended that such time be devoted to relevant activities.

Indeed, much of the practitioner oriented culture stresses the need for a high level of control over the organisations creativity. Many have argued that this control should come from the market, that innovators should pay considerable attention to the business environment (Drucker, 1980, 1985). Such firms will be ‘market driven’ instead of being technology driven by their innovators. But at the same time, Damanpour (1991) and others have stressed the importance of top management support if the innovation process is to be successful. Top management mediates, interprets and buffers the markets needs and allocates the organisational resources. It creates the context in which the project is embedded. In this sense management is less likely to try to direct the innovation process in its details than to legitimate and guide it by indicating which product innovation opportunities should be pursued and which should be ignored. Project selection is bureaucratic and carefully planned. It can be noted, successful investing in core competencies is anything but haphazard. Strategic plans must be laid and long term commitments resolved. The challenge of course is to know how to couple the institutional structure which supports the project's organic mode of governance into the bureaucracy which supports its mechanistic modes without crushing it and forcing the participants into an instrumental role oriented relationship with the firm.

2.6 Project champions

Similarly, the research into administrative innovation raises interesting and unexplored questions about institutional alignment and the tasks facing project manager’s (Daft, 1982). For many writers (Beatty et al., 1992), the solution to the problems of integrating the innovation project into the host organisation can be subsumed under the concept of the project champion, who then becomes the pivot of the inter-domain activity. The champion becomes the lynch pin connecting the organic institutionalised environment of the project team and the bureaucratic environment of the project team and the bureaucratic environment of the host organisation.

When this linking is done effectively, the project team is embedded like a raisin in a muffin. Effective champions maintain the integrity of the interface between the two domains. The analysis of how they succeed is often tautological, suggesting only that we know effective champions by their success. Sometimes the explanation refers to their ability to maintain the integrity of the boundary around the project and so protect it from the host organisation by hiding it.


Since in the USA there is often little alignment between the project and lost domains, the objective is to hide the project from outside view until its work is complete and its success cannot be doubled (Kanter, 1988a). The skunk approach is designed to add to the distance between the project and present organisation in every way possible by geography, culture, language, dress, work hours and so forth. Yet, the best hidden project must eventually come to terms with its host organisation. It must re-establish its legitimacy where that is derived and shaped by the organisational goals. Project failure makes this difficult especially if there are considerable consequential financial problem, projects such as in AT&T’s failure to enter the PC and small computer business. In some contexts, failure can still provide positive learning for the organisation, and this can ease the legit imitating process. Sometimes, success from the point of the project team turns out to be a failure from the organisation s point of view.

This is especially obvious when the project is improperly instructed prior to bureaucratic release and comes up with a technology driven solution which fails to meet the markets needs. IBM’s eventually effective entry into the personal computer field and the subsequent history of the company was significantly shaped by the failure of their first PC, a hopelessly technology driven machine. A number of writers have argued that the solution to the problems of integrating the different domains lies in making the host organisational context more hospitable to the work of the project teams (Burgelman and Sayles, 1986). They suggest that it is possible to create a better climate, so assuming away the alignment problem. This solution tends to trivialise the inter-domain tension which the dialectical model highlights and can be argued to be the heart of the problem of managing innovation. Whatever the force of rhetoric organisations cannot simply abandon their sense of purpose in favour of anarchy. Nor can the modern organisations do without internal sources of innovation. In short, the modern organisations problems is to sustain functional relations between the two modes of governance and to reap the fruits of their interaction while at the same time risking the dysfunctional and damaging consequences of failure.

Though it has been tried to demystify the championing activity and delineate the champion’s task and talents yet it can also be argued that the championing task changes as project unfolds. In the same way as the project goes through its different stages, so the championing task has three elements: path finding, problem solving and implementing. These are ideal types and cannot be merged. Clearly, they map reasonably well, into the dialectical model so that path finding means achieving alignment between the project within the host organisation and so securing legitimacy. Problem solving means leading the project team effectively to the planned conclusion, implementing means achieving bureaucratic capture or in other terms – systems integration.

2.7 The use of cross functional teams to promote integration

It can be seen as a technique for dividing up the project championing integration task and distributing it to a broader set of shoulders. Today, there is a tendency to see teamwork as the magic bullet for every organisational problem, so Beatty et al.’s (1992) cautions are highly pertinent. It may not be so easy to establish cross functional teams. Beatty noted that often the effective team could only be formed after the solution of the very problems it was intended to deal with. Getting mutually hostile departments to supply members of the of the cross functional teams on the grounds that the innovation to be adopted by the host organisation would call for such integration, turned out to be far from easy. So long


as the process team formation itself remains obscure, the appeal to cross functional teams is likely to be mere mystification.

But we can also recognise that the team is smaller than the desired organisation it models, so it may be easier to assemble the cross functional team and grow the new integrated organisation using the team as seed. Overall, there can also be a argument for three rules for effective innovation management; develop an effective champion, plan for a high level of systems integration and use organisational integration techniques.

Researchers classify innovation as two separate set of activities viz exploration and exploitation. Benner and Tushman (2002) and Jansen (2005) differentiate between ‘exploitative innovations’ which involve ‘improvements in existing components and architectures and build on the existing technological trajectory’ and ‘exploratory innovations’ which involve ‘a shift to a different technological trajectory’. In addition to this way of classification, authors have also indicated another dimension to distinguish between these two activities. Coombs (1996) suggested two sides of R&D activities; Investment mode where these activities are concerned with developing technological capabilities of organisations, and harvesting mode where R&D works with other functions of the organisation to exploit special services for customers.

Recently, He and Wong (2004) mention, an explorative innovation strategy to contain ‘technological innovation activities’ targeting new product – market domains and ‘exploitative innovation strategy’ to contain ‘technological innovation activities’ for ameliorating existing product-market. Authors of the strategic management describe exploration, in terms of competence building (Sanchez et al., 1996) or competence definition (Floyd and Lane, 2000), and exploitation, in terms of competence leveraging (Sanchez et al., 1996) or competence deployment (Floyd and Lane, 2000).

Cavone et al. (2000) indicates key characteristics of experimental programmes is a continuous search for new technological solutions and a learning process aiming to enhance the firm’s knowledge base and exploitation programme is to create value through current activities and to innovate by exploiting the skills embedded in a firm’s human resource and technical systems. Some authors relate these two activities as development and implementation stage of the innovation.

2.7.1 Recent studies (1990s–2010s)

Both exploitation and exploration are crucial for ongoing operations of organisations and organisational change (Crossan et al., 1999). However, Christensen (1997) suggested that due to the disruptive nature of the technology; experimenting units must be completely separated from exploiting units. In the stage models of innovation, Kanter (1988b) shows that the mix of activities required during the innovation process which varies greatly from stage to stage so as innovative behaviour which has been discussed until now idea generating (Waldman and Bass, 1991) extends to a broad range of other types of behaviour which combine to result the final innovative outcome. Despite the strategic management thinkers endorse ambivalent capabilities for an organisational excellence, organisational stimulants for exploration and exploitation are of such a conflicting nature that possibility of their co-existence at single space and time is quite perplexed. Both the activities are separated on the basis of location, time and structure within organisation. Separation of exploration and exploitation by location can be found in studies on ‘structural ambidexterity’ (Benner and Tushman, 2003; O’Reilly III and Tushman, 2004). Ambidextrous organisational forms are ‘composed of highly differentiated but weakly


integrated sub-units’ (Benner and Tushman, 2003). While the exploration units are small and decentralised with loose cultures and processes, the exploitation units are larger and more centralised with tight cultures and processes (Benner and Tushman, 2003). Both exploitation and exploration involve a trade-off, because firms with limited available resources may not be able to afford to exploit and explore simultaneously. Such a trade-off reflects a ‘key dilemma’ for organisations that aim to enhance both ‘adaptation to exploit present opportunities’ and their ‘adaptability to exploit future opportunities’ at the same time (Isobe et al., 2004). Recently, following a similar theme, Kastelle and Steen (2010b) were able to show that a small world structure could be demonstrated in a network of engineers designing a large industrial project. Small world networks have since been identified in a very wide variety of contexts, including nervous systems, power grids, film collaborations between Hollywood actors and investment banking syndicates (Newman, 2003; Schnettler, 2009). Stuart and Sorensen (2007) suggest that network research in organisation studies usually assumes that network structures are exogenous, whereby actors are randomly assigned to network positions (Breschi and Catalini, 2010). Most recently, a very large sample study has tested the small world hypothesis at the national network level using patent collaboration data from eleven countries (Chen and Guan, 2010).

3 Innovation

3.1 Relation between organisational development and various aspects of innovation

Several researchers (Leonard-Barton, 1985; Van de Ven, 1986) have argued that the relationship between organisational structure and the means by which innovations are implemented has a significant impact on innovation outcomes in terms of user acceptance and organisational goal achievement. It was further postulated that the strength of these relationships will be contingent on the stage of development that particular organisation finds himself in. Jablin (1985) argued that formal organisational structures and communication structures goes through a change as organisations progress through the different lifecycle phases. Miller and Friesen (1983) reported that organisations in different life cycle phase’s like-birth, growth maturity, revival and decline etc. exhibit changes in openness and fidelity of internal communication and centralisation of strategic decision making. Miller and Friesen’s (1980) analysis of archetypes of organisational transition (e.g., entrepreneurial revitalisation, consolidation, towards stagnation, towards centralisation and maturation etc.) using 24 organisational characteristics as discriminating variables(e.g., scanning, centralisation, and decision making, controls and communication system, effectiveness, technocratisation, risk taking, integration of decisions, organisational differentiation traditions and delegation of operating authority) suggests the key organisational trans evidence when organisational structures are significantly altered through the passage of life cycles or major transitions, with the relationship between those structures and structured implementation becoming more loosely coupled.

Following Van de Ven et al. (1989), the novelty and complexity of the innovation will act as contingent factors in the relationship between organisational structures and structured implementation activities. As Van de Ven et al. (1989) argued, “when truly


novel or new to the world innovations are undertaken, institutional infrastructure of procedural rules and resources often remains to be developed”. Similarly, an innovation that is highly complex in terms of size, number of stakeholders and number of components may weaken the relationship between organisational structure and structured implementation activities when multiple groups of stakeholders compete for direction of the innovation development.

3.2 Innovation in small and medium sized enterprises

Nowadays, small and medium sized enterprises have been finally recognised as one of the most driving forces of innovation and economic growth and studies exclusively focusing on their peculiarities are increasing the question that is whether global competition forces SMES to adopt particular organisational arrangement, regardless of nationality to achieve comparable effectiveness? Fogel (1994) emphasised the small business literature offers a fragmented list of environmental conditions that is not of any help for the study of local entrepreneurial development.

3.3 Information processing requirements of different strategic orientations [Bartlett and Ghoshal’s (1988) model]

Within the firms they studied, Bartlett and Ghoshal (1988) identified three distinct strategic orientations: national responsiveness, efficiency and shared learning. Each orientation implies a different level of environmental and task uncertainty and has varying requirements of global information processing. The orientation of national responsiveness means being able to deal with the varying needs of many different markets, products, suppliers and customers. Such diversity leads to a high need for differentiation across country units. These calls for an uncertainty reduction strategy: each unit is insulated from others and give the necessary information capability to quickly respond to environmental uncertainty in its own markets.

As changes in the environments of other country units have small or no impact, there is little need to share other than summarised financial information across borders. Bartlett and Ghoshal (1988) label this type as a multi-national. To maximise the second orientation, viz efficiency there is a high need for cross border information processing. According to Galbraith and Tushman and Nadler, efficiency is an over riding consideration where units depend on others for critical resources, and where local environmental uncertainties are moderate (such as in the sale of a global product) the need and opportunity to co ordinate across country units is great. Where as the multi-national firm resorts to reducing the need to process information across the country units, the second type of firm, Bartlett and Ghoshal’s (1988) global firm focuses on increasing the information processing across country units.

This suggests that the coordinating mechanisms of organisational hierarchy and standard operating procedures, supplemented with investments in vertical information systems, will provide effective but formalised and standardised, information processing across country units. The amount of information shared across country units is high, but the information flows are routine and structured. Bartlett and Ghoshal’s (1988) third strategic orientation – the need for shared learning focuses on the development and diffusion of innovations. Knowledge about products and processes developed by the headquarter markets must quickly move to other units where that knowledge is adapted to


local conditions. Here environmental uncertainty arising from the local environment falls somewhere between the multi-national and global firms. So too does the uncertainty arising from managing the inter unit integration between the parent and other country units. Although this third type of firm, the international firm, has moderate intercountry information processing requirements they are highly knowledge rated and hence equivocal.

These unstructured flows require rich information processing mechanisms that can manage multiple perspectives, quick feedback, and broad bandwidth for verbal, audio, graphic and textual cues. From this, it can be predicted that the use of various lateral organisational mechanisms such as task forces, liaisons, teams, matrix structures and rotating personnel will be needed for the purpose (the innovation and R&D literature also stresses the importance of horizontal communication systems and mechanisms).

It can be anticipated that use of such electronic communication systems as e-mail, voice mail, and video conference facilities to supplement or substitute for these lateral relationships. In time, networks of work stations should permit far more sophisticated forms of relatively unstructured and rich interactions among dispersed workers and hence allow a far greater capacity to deal with equivocality than that provided by traditional IT coordinating mechanisms.

3.4 Organisational structures of the Bartlett and Ghoshal’s models

The strategic orientations determine the information processing requirements of the firms. In this work, some of the information processing mechanism systems for providing the capability for information processing were presented. The overall organisations structure includes the decision making structure, which controls the flow of information within the firm. The general patterns of decision making structures of the Bartlett and Ghoshal’s models (1988) are summarised below:

• Multinational – A multinational firm treats every region to be different and thus autonomy is given to the different units. Thus more formalisation among the autonomous units but less centralisation is the norm.

• Global 2 – A global firm treats the world as one unified market and generally ignores country specific requirements. The key product and human resource decisions are made at head quarters and communicated and implemented consistently throughout the world. Bartlett and Ghoshal predicts that tight centralise structures characterise a global firm.

• International – An international firm falls within the two orientations both in uncertainity and autonomy. They have medium need of information processing and fall within the two domains of global and multinational, in the continuum.

3.4.1 Some important recent studies

Roy and Dhawan (2002) found in their study on Indian CSIR laboratories that better communication system can help scientist to update knowledge in their area of interest and can improve productivity communication across the boundaries may be key to the generation of the new ideas. In company like 3M, a dense network of communication works across the boundaries. Companies with dense network of the horizontal communications tend to be better innovator than companies which communicate less


(Nohria and Ghoshal, 1997). Winter and Szulanski (2001) illustrate that the exploration phase of a replication strategy characterised by discovering and developing a business model is facilitated by the acquisition of knowledge by the central organisation from its outlets. The exploitation phase of a replication strategy characterised by stabilising and leveraging the business model is facilitated by the acquisition of knowledge by the outlets from the central organisation. Learning through the acquisition of knowledge may be either exploratory reflected in an increase of the variety and broadness of the knowledge recipient’s knowledge base (e.g., Dinur and Inkpen, 1996; McGrath, 2001; Nonaka, 1994; Tsai, 2001), and/or exploitative reflected in an increase of the reliability and depth of the knowledge recipient's knowledge base (Adler et al., 1999; Levin, 2000).

4 Conclusions

In summary, the literature on structure and innovation does not deal very well with managing the tension between the two modes of governance. One group of writers suggests that the integration problems can be solved by removing the tension (Burgelman and Sayles, 1986) while others suggest it can be collapsed into the project champion’s task.

In some cases, this advice is pure mystification, for the champion’s abilities are ill-specified and his/her performance can only be evaluated like that of the uncertainty resolving entrepreneur but literature does show us that for an innovation to be successful it must successful in both the domains, both within the team’s framework and within the host organisation. Thus, it can be argued that innovation is invention plus implementation of Van de Ven’s (1986) speculations support our view that detaching the innovation project from its environment, which follows when Daft’s (1978) model is adopted removes the top management’s problems of controlling its direction (attention), the subsequent integration of its output (the part-whole relationship), and its legitimacy (conversion) into good currency. Thompson distinguished the rational requirements of the technological core from the natural system requirements of the boundary-spanning activities.

Daft (1978) suggested that these two domains should co-exist so long as the boundary-spanning activities isolated the core from the environmentally generated uncertainties and disturbances. Applying his idea to the management of innovation, it is clear that when the source of the uncertainty is internal Thompson’s model needs extension.

The organic knowledge seeking processes of the innovation project needs protection from the mechanistic and certainty – assuming process of the host, in the same way that the bureaucracy of the host needs protection from the seemingly unstructured activities of the project’s innovators. At the same time, it can be said that the innovation process is never unstructured in the ways implied in much of the literature. It is held together by a glue of institutional forces rather than by the knowledge-based links of a bureaucratic structure (Kossek, 1989). The unavoidable tension between the two domains cannot be eased into insignificance by the exchange of information and other palliatives. The problems are obviously reduced when the institutional forces are aligned with the organisational goals and this is what ‘organic’ really means. Such conditions seem common in the better run Japanese organisations. But such alignment is probably rare, though not unknown in Western organisations. Where it exists it is the result of careful


planning prior to transferring responsibility for the innovation processes soon. As we recognise the essential tension between the mechanistic and organic modes of governance, we begin to get a better handle on the problems of managing innovation and integrating the uncertainties of project work into the organisation.

There may well be some circumstances under which the tension can be eased away by diligent manipulation of the organisational culture so that innovative behaviour becomes institutionalised. However, this would seem to be a counsel of perfection and an exception rather than the rule.

More often the tension persists and must be managed on a project by project basis. Project champions internalise this tension and make its management their task. Under some circumstances the task can be diffused to champion’s teams. In addition to these heuristics attention should be on the structural aspects and to the transfer of responsibility and control implied by ‘release’ and ‘capture’. It can be argued against the nostrum that teaming and removing organisational barriers is a comprehensive answer. Nesting means establishing secure boundaries between the contrasting domains and protecting them from each other.

The skunk works approach, of hiding the project until its results are self-evident, can only work when the resources required are negligible and can come out of hidden (slush) funds and when the project’s lack of legitimacy does not prevent its process. Clearly, these circumstances are unlikely to apply to the organisations legitimacy. Given legitimacy, resources and acceptance follow.

Major innovations can be protected by locating them at different sites, but it is then difficult to achieve reasonable oversight and the projects eventual capture. Sometimes, capture can be facilitated by moving people on the team from the project mode into the implementation mode. But again, this is no simple solution for it is also likely to disturb relationships with those in the host whose support is now required.

Hostile department’s attack each other in a broad variety of ways through the political activity surrounding the resource allocation process, by fighting for top management’s attention, by competing for influence over the organisation’s strategies and arguing over innovation projects. Thus, top management’s function is not merely to legitimate, support and resource-innovation projects which bring uncertainty into the body of the organisation but also to establish internal boundaries and police them if the tension is not to prove dysfunctional. They can sometimes achieve bureaucratic release and allow the project a certain ‘arm’s length’ autonomy or can provide strategic orientation while leaving the project to establish its own tactics.

Local knowledge is thereby harnessed to the organisation’s strategy. At the same time, the outcome of such autonomy can be influenced by establishing an internal market in which several projects complete for resources and managerial attention. As in agency theory this transfers some of the responsibility for maintaining the team’s strategic direction as the project unfolds from the bureaucracy to the project leadership. As the project leaders make the organisationally given strategy the core of the team’s culture, they achieve a deep structure solution (Bailyn, 1985).

Acknowledgements

The authors are grateful to the referees and the editorial office for helping to submit the revised paper in the present form.


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Structuring for Innovation

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