Economics at your fingertips  

Organizational complexity and innovation portfolio decisions: Evidence from a quasi-natural experiment

M. Nesij Huvaj and William C. Johnson

Journal of Business Research, 2019, vol. 98, issue C, 153-165

Abstract: We examine how a firm's organizational complexity affects innovation portfolio decisions in response to a shock to innovation incentives. Using the 2013 medical device sales tax as a quasi-natural experiment, we find that firms with a complex organization structure, as proxied by organization size and multi-division structure, generate fewer radical innovations (introduction of new products) but more incremental innovations (improvements on existing products) after the tax. Multidivision firms also shift capital investment to their corporate divisions that are not affected by the tax, thereby decreasing their innovation output. Collectively, these responses cause a significant decline in the radical innovation output of the industry in aggregate. We contribute to the literature by advancing the understanding of how organization structure influences managers' innovation portfolio decisions in response to economic shocks.

Keywords: Innovation portfolio; Incremental; Radical; New product; Medical device; Excise tax (search for similar items in EconPapers)
Date: 2019
References: View references in EconPapers View complete reference list from CitEc
Citations: Track citations by RSS feed

Downloads: (external link)
Full text for ScienceDirect subscribers only

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link:

Access Statistics for this article

Journal of Business Research is currently edited by A. G. Woodside

More articles in Journal of Business Research from Elsevier
Bibliographic data for series maintained by Dana Niculescu ().

Page updated 2019-05-11
Handle: RePEc:eee:jbrese:v:98:y:2019:i:c:p:153-165