The <scp>knowledge‐incentive</scp> tradeoff: Understanding the relationship between research and development decentralization and innovation

Research Summary Strategy scholars view innovation through the lens of knowledge recombination, whereas organizational economics effective incentive design. This sets up a tension regarding how firms should structure their research and development (R&D) units. Namely, decentralization facilitates use incentives but comes with cost reduced intra-organizational flows. In this study, I unpack by examining novelty inventions that create develop. argue R&D centralization creation are more novel, lower average progression development. find support for these arguments in pharmaceutical industry between 1995 2015. Managerial When does or firm's have greater impact on innovation? has important managerial implications as it shapes whether better off centralizing decentralizing Centralization enables to make ensures incentives. More associated is critical if wish develop novelty. contrast, want quantity