The (In)Effectiveness of Cross-Functional Innovation Teams: The Moderating Role of Organizational Context

Cross-functional teams are often seen as key for innovation projects. At the same time, functional diversity also introduces conflict, which may hinder a team's optimal performance. Most of the existing literature focuses on resolving and preventing these conflicts; however, conflict alone fails to explain why the contribution of these teams to performance is found to be absent in certain types of firms. This paper investigates the moderating role of organizational context on the relationship between cross-functional teams and performance. A multilevel sample of 142 projects in 95 firms is used to demonstrate that cross-functionality contributes to the performance of innovation projects in more functionally organized firms, with a separate innovation unit, and above-average levels of organizational connectedness. Other types of organizations may want to reconsider the use of cross-functional teams for their innovation projects.