Knowledge specialization, organizational coupling, and the boundaries of the firm: Why do firms know more than they make?

Administrative Science Quarterly,  Dec, 2001  by Stefano Brusoni,  Andrea Prencipe,  Keith Pavitt

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ORGANIZING FOR INNOVATION: THE CONCEPT OF COUPLING

The aim of innovating organizations developing multitechnology, multicomponent products is twofold. They generate variety by developing specialized bodies of knowledge to foster the process of discovery of novel solutions. They also coordinate dispersed learning processes carried out within different organizations. The generation of variety calls for some degrees of specialization among organizational subunits (e.g., firms, divisions, R&D labs), based on the different scientific and technological disciplines these units master and on the idiosyncratic learning processes and search paths they pursue. The achievement of coordination requires some degrees of integration among organizational subunits to identify and actively manage the relevant technological and organizational interfaces (Lawrence and Lorsch, 1967). Orton and Weick (1990: 205) used the interaction of specialization and integration (which they called distinctiveness and responsiveness, respectively) to determine the extent of coupling across organ izational units:

If there is neither responsiveness nor distinctiveness, the system is not really a system and it can be defined as a noncoupled system. If there is responsiveness without distinctiveness, the system is tightly coupled. If there is distinctiveness without responsiveness, the system is decoupled. If there is both distinctiveness and responsiveness, the system is loosely coupled.

Knowledge specialization per se plays a major role in explaining the emergence of loose coupling. Clark (1983: 16) quoted in Orton and Weick (1990: 206), focused on changes in university structures:

[A]n academic system works with materials that are increasingly specialized and numerous, knowledge-intensive and knowledge-extensive, with a momentum of autonomy. This characterization applies most strongly to advanced systems, but even the most retarded systems will be based on a half-dozen or more distinct bundles of knowledge that have their own internal logics and an inherent bent toward autonomy.

This description of universities also fits the situation faced by multitechnology firms. The increasing number of highly specialized bodies of knowledge hampers the effectiveness of vertical integration as a coordination mechanism and pushes firms to increase their reliance on a combination of in-house and contract R&D (Langlois, 1992; Granstrand, Patel, and Pavitt, 1997), as well as on externally designed and manufactured components and subsystems. At the same time, the control system case and other previous research illustrate the need for "lean" companies to maintain wide (and widening) knowledge bases.

The usefulness of the concept of loose coupling lies in its capacity to frame, in a unified analytical setting, the study of two important aspects (specialization and integration) of firms developing multicomponent, multitechnology products: loosely coupled organizations exhibit properties of both decoupled and tightly coupled systems. We use the concepts of product systemic interdependencies and technological imbalances to identify the conditions under which "looseness contributes to successful change" (Weick, 1982: 378). We use the case study of the aircraft engine control system to illustrate the conditions under which firms within organizations (i.e., networks) should be loosely coupled among each other in relation to the evolution of technologies and products they develop and market. We also focus on the specific coordination mechanism on which loosely coupled networks rely and which differentiates them from tightly coupled and decoupled networks.