Two dysfunctions in high-tech research and development
In this paper, I discuss organizational problems in the field of high-tech research and development in a firm. In particular, two dysfunctional phenomena are very important because they pose peculiar problems in Research and Development activities. The first problem is reverse hierarchy wherein the scientific knowledge hierarchy expands in a direction that is reverse to that of the power hierarchy. In high-tech industries, forefront knowledge is concentrated in junior scientists who hold little power with regard to investment decision-making. On the other hand, top managers of the firm who are located at the top of the power hierarchy usually cannot comprehend forefront scientific knowledge. The second problem is the paradox of conservatism by innovation, which means that successful technological innovation causes the members of the firm to resist further innovation involving radical change in the fundamental structure of core technology. In other words, members of the organization are inclined to make only small improvements in technological innovation. The greater the success, the stronger and longer lasting is the conservatism. A way to resolve the first problem is to designate senior scientists for positions in top management. As they are more familiar with science than business managers, they can understand forefront scientific knowledge to a certain extent. However, they tend to cling to past innovations that they themselves have devised. Thus, a second problem arises from the solution for the first. I analyse potential solutions to these problems through Japanese case studies. Japanese companies try to resolve the first problem, that of reverse hierarchy, in two major ways. The first one is to expand the discretion of scientists.
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