Design Issues for Innovative Firms: Bureaucracy, Incentives and Industrial Structure

Abstract

Abstract The wider issue of linkage between organizational variables and the application of new technology is addressed, focusing in particular on innovation at the level of the firm and on the choice of organizational variables that go best with different types of innovation. In the process, there is a comprehensive analysis of the underlying properties of technological innovation per se, and a set of archetypal governance modes for firms. The thrust of the argument is the need to take a broader view of innovation, not only by looking at market structure but also by relating it to organizational structure and firm boundaries as well. Both the formal and the informal structures of the firm, and the network of external linkages that they have, substantially influence innovative activity in firms. The chapter goes on to suggest that the complex and increasingly common inter‐firm arrangements that exploit complementarities and are often linked to the development of technology in fact constitute an organizational innovation of great importance.