Forthcoming, Strategic Management Journal
Abstract: Prior research has argued and shown that firms with centralized R&D produce broader innovations relative to decentralized firms, but the organizational mechanisms underlying this relationship are underexplored. This gap limits our understanding of whether and how formal R&D structure can be used as a lever to influence research outcomes. To address this question, we study the relationship between formal R&D structure, internal inventor networks, and innovative behavior and outcomes. We find that centralization of R&D budget authority increases the connectedness of internal inventor networks, which in turn increases the breadth of impact of innovations and the breadth of technological search. Surprisingly, decentralization does not have the opposite effect. Our results suggest that changes in structure influence innovation outcomes through changes in inventor networks, with a lag reflecting organizational inertia.