This research indicates that firms create value & pursue successful change when there is a U shape relationship between reorganization & innovative performance, where learning is a mediating factor.
Research by author includes 250 medical firms studied over a 20 year period including their units & product markets. These medical firms belong to the pharmaceutical, health care service & medical device industry. This study makes use of following factors & variables:
· Degree of innovation (dependent variable)
· Degree of reorganization (independent variable)
· There are two types of control variables used in the study; firm level & industry level. Firm level control variables include number of employees, medical sales, percent medical sales, age, public status & foreign status. Industry level variable includes category of pharmaceutical or healthcare services, it is a dummy variable
· Learning (Mediator factor)
Findings of the research: This research by Samina Karim provides three findings. First; reorganization has a U-shape relationship with innovation. Second; only current reorganization experiences affect innovation, past reorganization experiences do not affect future innovation. In my opinion past experiences are as important as current experiences. Past experiences provide organizations with ideas that can be used to create current innovations. Third; Acquisition active firms innovate more than non- acquisition active firms. After acquisition process, a product manufactured by the acquired firm is used to make a new product by integrating it with new product. For example, Siri Inc developed intelligent personal assistant software, after Siri was acquired by Apple Inc., the intelligent personal assistant software became an integral part of IOS. Also after acquisition process, a product manufactured & sold by the acquired firm can be sold under the name of acquiring firm. For example, Pfizer acquired Wyeth in 2009. Products that were produced by Wyeth are now produced under Pfizer brand, e.g. Advil was discovered & sold by Wyeth before acquisition. After acquisition, Advil is now sold under Pfizer brand.
Drawback of the research: Author indicates that the limitation of this study was that it examined radical innovation only at the product level. Different control variables can be used apart from control variables used in the study such as adding a control indicating level of related ness between acquired activities & activities of firms to conclude if this affects innovations. In my opinion there is one more drawback of this study, it is:
· Study includes only healthcare related organizations such as pharmaceutical, healthcare & medical device industries. Therefore the study can be applied to only healthcare sector
Managerial implication of the study: According to the author, managerial implications of this study are:
· Managers should be cautious in distinguishing between reorganization events
· Reorganization in the firm is successful only if employees are able to learn from the cohort of several experiences. If there are limited resources in organizations then reorganization may not be the best innovation strategy for such organizations
· Concentrating on development of internal units in organizations is as important as acquisition
In my opinion managers should also concentrate on educating their employees in change management. Energetic managers & Enthusiastic employees always try to implement new innovations in organizations. Hence managers should discuss innovation strategies with their internal units from time to time.
Reference
Karim, Samina. “Business Unit Reorganization & Innovation in New Product Markets.” Management Science 55.7 (July 2009): 1237-254. Informsonline. Informs.org, July 2009.
Great article Vijeta! I agree with you that Managers should train their employees in change. This can become very fruitful because it will keep the dynamic environment within the employees. Maintaining a dynamic enviroment in the workforce, will allow the company to be more acceptable of change. I also agree with the article on the point that companies should value development of internal units as much as acquisitions. A firm that focus too much on acquisitions while lose the true nature of acquisitions which in my opinion is make one's firm stronger. There are great examples of how combining two technologies will make a product that much more attractive i.e. Cole Haan being bought by Nike. Nike was able to introduce their sole technology to the Cole Haan leather shoes. Nike benefitted from the Cole Haan leather expertise and was able to use that expertise in some of their athletic shoes such as their Jordan Line. Once again great article and it brought up great points.
ReplyDeleteI agree with you Jose, too much acquisition is not good. Companies should focus more on developing their internal units. Sometimes acquiring only a section of the company is much better than acquiring the whole company. For example, Jacobs engineering group acquired "Process and construction business area" of Aker solutions;one of the leading global oil service company. In my opinion this acquisition was synergistic.
DeleteIn this fast paced global economy, we know that reorganizations are going to happen quite often. Right now in the medical device industry, companies are merging and being bought out at an increasing pace. There is nothing within the industry that would suggest that this is going to change any time soon especially with the new aspects of obamacare. These reorganizations can be good and fruitful if done correctly. Innovation can and should take place not only in product but also in process. I do agree with you Vijeta that employees should be educated in change management. Great article and interesting points.
ReplyDeleteI agree with you Mark, healthcare reform is going to change healthcare industry. There are both negative and positive aspects of healthcare reform. The positive aspect is that they want to insure and provide care to everyone but there are less number of healthcare providers when compared to the healthcare takers. In my opinion they are not addressing this issue properly.
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DeleteVijeta, it is interesting to think about the relevance between business unit reorganization and innovation. My opinion is that business unit reorganization is one way in managerial innovation. Business unit reorganization will affect the mode of innovation because management mode changes. It is true that acquisition active firms would face more changes for the reorganization and have more power for innovation. I do agree that employees should be involved with the management in the business unit reorganization, and it will be helpful in implementing innovation strategy in the process of unit reorganization.
ReplyDeleteGood article. I think it is important organizations to train in change management. It is important for a company to be able to reorganize quickly and with managers trained correctly this could be a smoother task. I also agree with your comment to Mark earlier about the Healthcare reform. It is interesting how everyone is focused on getting insurance and healthcare to everyone, however their is not enough providers. I think that this issue needs to be addressed soon, or our healthcare is going to occur even more price increases due to shortage of supply.
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