Management innovation in Centers of Excellence: How to make it work?

This thesis explains how management innovation can be successfully transferred from explorative Centers of Excellence to exploitative Business Units. There’s a common understanding in literature that organizing innovation in separated units has advantages for exploration and exploitation and improves ambidexterity. Most research however focusses on technical product and service innovation. This thesis focusses on management innovation and the necessary conditions for transferring management innovations from corporate innovation units to autonomous Business Units. A case study is performed in AkzoNobel, a leading global Paints and Coatings manufacturer. Two commercial management innovation cases developed by separate Centers of Excellence, each transferred to four Business Units have been researched. The findings suggest six necessary conditions for a successful transfer of management innovation between separated explorative and exploitative units: (1) the management innovation is strategically critical, (2) executive leadership is aligned, (3) Business Unit leadership is committed to the management innovation transfer, (4) integration mechanisms between explorative innovation units and exploitative Business Units are in place and active, (5) the exploitative Business units are ready to change by having absorptive capacity and dynamic capabilities and (6) coercive deontic power based change management is applied. Besides the six necessary conditions, propositions and insights in relation to organizational change and ambidexterity are developed. In organizational change perspective it is suggested that (a) management innovation has an institutional effect requiring coercive power based change efforts and (b) the role of prior knowledge in absorptive capacity to enable change is negative if the newness of the innovation is too small. Regarding organizational ambidexterity it is suggested that (c) integration mechanisms have an indirect effect via absorptive capacity on ambidexterity benefits and (d) ambidextrous tensions in management innovation transfer can be overcome by the six necessary conditions defined. The results of this study fuels further academic discussion on management innovation and helps organizations to effectively organize management innovation in Centers of Excellence to improve organizational performance.