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Prof. Paola Criscuolo
Professor of Innovation Management
Business School
Imperial College London

This paper explores the impact of centralization or decentralization of development activities on a firm’s development and commercialization outcomes. We hypothesize that although the centralization/decentralization of development and of research are afflicted by the same underlying trade-offs, these trade-offs are manifested in qualitatively distinct ways in development vs. research. Specifically, whereas centralization of research offers a primary benefit of enhancing the breadth of knowledge recombination (with a concomitant reduction in BU-specific knowledge creation), centralization of development offers a primary benefit of reducing duplication of development effort. The concomitant cost is that this satisficing version will not be ideal for any given business unit; on the margin, this leads to lower rates of commercialization of development’s outputs. To test these hypotheses, we exploit a unique dataset that is composed of all invention disclosures, including those for which it chose not to seek patent protection, submitted by R&D personnel at a global ICT company where the organization structure governing development activities shifted from a decentralized structure to a centralized one. Exploiting this shift in the organization of development activities, we examine subsequent changes in development outcomes. We find support for our hypotheses: The shift from decentralized to centralized development is associated with 1) reduced duplication across inventions by development personnel, and 2) reduced likelihood that an invention is commercialized.