The Effect of Organizational Structure Change on Inventor Networks

Nicholas Argyres (Olin Business School)
Luis Rios (The Wharton School)
Brian Silverman (Rotman School of Business)

Abstract : The last decade has witnessed a renewed interest in the relationship between the structure of the R&D function and the resulting innovative outcomes. Research has demonstrated that distinct formal organizational forms are associated with different patterns of innovation. This question is particularly important in light of mounting evidence that that the rate and direction of innovation is influenced by the structure of social networks, through the patterns of informal communication among a firm’s inventors. However, very little work has explored how changes in structure affect these correlations. To address this gap, we study the effect of changes in formal R&D organization structure on both informal organization and innovative outcomes, and explore the degree to which informal networks moderate the relationship between change in formal structure and in innovation. Using information on changes in formal R&D organizational structure undertaken by several firms, we examine the effects of these changes on traditional patent-based measures of innovative search and innovative impact. After documenting the shift in innovation that follows changes to organization structure, we then explore the mechanisms underlying this shift by examining the relationship between changes in formal organization structure and changes in the informal inventor network of relationships within these firms. We find that formal changes that centralize R&D budgetary control have a quick, significant, and persistent impact on the patterns of inventor co-authorship: Inventor networks become more centralized and denser. Conversely, these changes have either no impact or the opposite impact on inventor citation networks. We discuss future work that can exploit these network measures to tease out the relationship between organizational structure and innovation.

Political Shock and Firm Performance: Evidence from Telecommunications License Cancellations in India

Daniel Blake (IE Business School)
Srividya Jandhyala (ESSEC Business School)

Abstract : Although a firm’s political environment impacts strategy and performance, existing research has given little consideration to how changes in the political environment impact firms. We argue that following a political shock – or an unexpected and significant change in the political environment – the operational performance of the firm declines. Responding to the shock can be managerially costly; firms divert significant managerial resources from routine operations to responding to the political challenge. As finite managerial resources are spread over a greater number of novel and challenging political activities, rather than core productive activities, firm performance on operational parameters suffers. Further, if there is a decline in managerial resources devoted to oversight of assets that are centrally managed but utilized across multiple locations, we expect to observe the negative effect on operational parameters in all locations that share common assets, even if those locations are not directly affected by the political shock. Using a natural experiment and a difference-in-differences approach, we find support for our arguments in the context of telecommunications firms in India.

The Impact of Competition on “make-or-buy” Decisions: Evidence from the Spanish Local Tv Industry

Ricard Gil (Johns Hopkins Carey Business School)
Christian A. Ruzzier (Universidad de San Andres)

Abstract : This paper empirically investigates whether changes in product market competition affect firm boundaries. Exploiting regulation-induced shocks to entry barriers and differences in regulation enforcement across cities to obtain exogenous variation in competition, we establish a negative causal effect of competition (through reduced entry barriers and a larger number of rival firms) on vertical integration in the setting of the Spanish local television industry between 1995 and 2002.

Exporting Sweatshops? Evidence from Myanmar

Mari Tanaka (Hitotsubashi University)

Abstract : I investigate the causal effect of exporting on working conditions and firm performance in Myanmar. This analysis draws on a new survey of manufacturing firms from 2013 to 2015. I use the rapid opening of Myanmar to foreign trade after 2011 alongside identification strategies that exploit product, geographic, and industry variations to obtain the causal estimates of the impact of trade. Exporting has large positive impacts on working conditions in terms of fire safety, healthcare management, freedom of negotiation, and wages. It also increases firm sales, employment, and management practices as well as the likelihood of receiving a labor audit.