Informal networks, formal structure and incremental innovation

Informal networks, formal structure and incremental innovation

Where are the most innovative employees within organizations? What is their position in the informal knowledge-sharing network and the formal organizational structure? What is the relationship between formal and informal dimensions? Using data from a sample of 276 engineers working for a multinational and multi-unit company operating in the semiconductor industry, we show that individual at the core of the informal organizational network and also belong to core organizational units achieve superior innovation productivity, as a greater number of patent applications filed to United States Patent and Trademark Office, reveling the complementary roles of informal and formal mechanisms in improving innovation performances.

The perks of being a core/core employee

The positive impact of intra-organizational networks on organizational and individual outcomes, such as creativity and innovation, is well known to scholars and practitioners alike. However, the predominant focus on informal aspects of organizational relationships often overlooks how other organizational factors—such as the formal organizational structure in which individuals operate —may influence individuals’ innovative performances (Tsai, 2001; Burt, 2004; Perry-Smith, 2006; Tortoriello and Krackhardt, 2010; Sosa 2011). Our article, recently published in Organization Science, highlights how individuals positioned at the core of the informal intra-organizational knowledge-sharing network who simultaneously belonged to a core R&D laboratory had the highest innovative productivity, measured as the number of product developments and improvements, they were able to produce, because they benefit of legitimacy and access to valuable resources. Indeed, in our study, we focus on predicting incremental innovations from core/core employees, because they can reap double benefits of legitimacy and social support from being core in the informal network, and access and control over resources from belonging to a core unit (Cattani and Ferriani, 2008; Dahlander and Frederiksen, 2012; Fonti and Maoret, 2016). Nevertheless, we also observed that this greater ability to develop innovations is contingent on how these core/core employees distributed their ties within the informal intra-organizational knowledge-sharing network. In particular, core/core employees that interact with the periphery of such network tended to exhibit lower innovative productivity, while those who concentrated their knowledge-sharing ties with colleagues located in the core of the informal network achieved greater innovative productivity, because of the difficulty to integrate different type of knowledge and lost focus on implementation activities.

The effect of formal and informal structures on innovation

Our findings reveal that the effects of core positions in the formal and informal structure largely operate in parallel, allowing us to specify the nature of the relationship between formal and informal structures. Rather than being alterative or substitutive, the effects of these two dimensions are independently established and reinforce each other, increasing individuals’ innovative productivity.

In fact, our results show that formal and informal core positions do not simply co-exist and operate in parallel, but function in a multiplicative way. This means that formal and informal core positions enable individuals to leverage and mobilize not simply different, but complementary types of resources that facilitate implementation activities and greater innovative outcomes (i.e. mobilizing tangible resources and, legitimacy and social support). Uncovering organizational complementarities is particularly important as they can generate competitive advantages for firms.

Defining the organizational core

Overlaying two related core–peripheral structures is a powerful tool to identify a small subgroup of individuals who constitute the organizational “engine,” or core, in that they develop more innovations than anyone else, due to their legitimacy, recognition, support, status, and access and control over valuable knowledge and resources. It is crucial to isolate and identify this subgroup, especially when it comes to the demands of the wider organization. The visibility of these core/core individuals exposes them to requests from multiple organizational stakeholders, leaving them open to the risk of “spreading themselves too thin,” which, according to our findings, could deplete their innovative productivity, and create network patterns that are suboptimal for the organization as a whole. Core units should be encouraged to keep a focused system of network relationships gravitating around other central individuals, allocating time and effort for these relationships, particularly if the goal is to increase innovative productivity through the implementations of innovations. This is not to say that R&D managers should isolate their workforce in core networks, preventing them to connect with different parts of the network. Indeed, over time, this could result in the reduction rather than the promotion of innovation productivity. Instead, the message here is one of relative focus of network relationships (particularly for employees located in core organizational structures) to counteract the tendency towards over dispersion of network time and effort.

Additionally, to increase innovation productivity, core individuals in the informal network that operate in peripheral organizational units should either be moved to core units or given more attention, resources, and legitimacy through other mechanisms. We observe that such individuals could boost their high innovative productivity through affiliation with core formal units. Moreover, the structure of the informal network may change and evolve over time, which emphasizes the importance of continuously focusing network ties towards core parts of the network. As cores reconfigure in a network, for instance around new promising technologies, they must be reinforced and protected to promote higher innovation productivity. Hence, managers interested in boosting innovation productivity must identify and protect existing cores, while making sure that they don’t stifle the reconfiguration of the informal structure. 

DOI link:

Massimo MaoretMassimo Maoret, Professor of Strategic Management, IESE Business School, Barcelona, Spain

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Marco TortorielloProfessor of Strategy & Organizations, Bocconi University, Milan, Italy

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Daniela IubattiDaniela Iubatti, Professor of Strategy, KTO Research Centre, SKEMA Business School - University Côte d'Azur, France, GREDEG

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