Discussion Questions November 22, 2012 POSTECH Strategic Management of Information and Technology Laboratory (POSMIT: Dept. of Industrial & Management Engineering POSTECH

2 Discussion Questions ■Chapter 10. Organizing for Innovation 3.What factors should a firm take into account when deciding how centralized its R&D activities should be? Should firms employ both centralized and decentralized R&D activities? –Value of taking advantage of economies of scale –Opportunity to divide labor across a broader pool of R&D specialists –Importance of tapping local knowledge resources –Degree to which the divisions of the firm are likely to benefit from sharing innovations across them –Degree to which innovations will require substantial customization for the local market –Cost of coordination and communication across the divisions –Most organizations can benefit from some combination of both centralized and decentralized R&D activities, as a function of the importance of the previously mentioned factors, however the cost of coordinating the combination of centralization and decentralization must be taken into account

3 Discussion Questions ■Chapter 10. Organizing for Innovation 4.Why is the tension between centralization and decentralization of R&D activities likely to be even greater for multinational firms than firms that compete in one national market? –Because of the greater magnitude of the differences between divisions –Characteristics of foreign markets –Likely to have diverse product needs, different operating norms, and even different legal and institutional structures –Often being source of diverse information and other resources –Physical and cultural distance between markets  It is more likely the innovations developed in decentralized local markets will not be diffused to other divisions or the customization that made a product attractive in one market may make it difficult to transfer to another  A greater likelihood the product will be met with the “not invented here” syndrome