The knowledge-incentive tradeoff: understanding the relationship between research and development decentralization and innovation

R&D centralization facilitates the creation and development of inventions that are

more novel

R&D decentralization facilitates the creation of more inventions of

lower average novelty

For invention, greater intra-organizational knowledge flows associated with centralization of R&D facilitate the recombination of a broader array of knowledge enabling the creation of inventions that are of 

greater average novelty. 

Decentralization of R&D is associated with the more effective use of (1.) which causes greater effort enabling the creation of (2.)

1. Higher-powered incentives

2. More inventions but of lower average novelty.

R&D decentralization can facilitate development through engendering greater managerial effort which enables the execution of more (?) development activities.

Routinized

Disadvantage of R&D decentralization regarding knowledge base

Decentralization comes with the cost of reduced access to a firm’s full knowledge base.

For more novel inventions, access to a firm’s (?) will be more critical.

full knowledge base

For less novel inventions, (?) can be more effective at driving inventions through development as the tasks will be more routinized.

incentives

Firms with decentralized R&D units are associated with the generation of inventions that are more/less novel, on average, than those generated by firms with centralized R&D units.

less

Firms with decentralized R&D units are associated with the generation of more/less inventions than firms with centralized R&D units.

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The reason why decentralized R&D units are associated with inventions of lower average novelty is because greater decentralization is associated with (?)

reduced intra-organizational knowledge flows, limiting the breadth of knowledge that can be accessed to create more novel inventions.

Firms with a higher proportion of more novel inventions in their portfolios benefit more/less from the rich intra-organizational knowledge flows associated with centralization of R&D. 

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