The use of small units to generate and transfer knowledge within large firms

Summary form only given as follows. Over the last few decades, scholars and researchers have been increasingly drawn to the study of innovative processes and, more generally, to issues relating to the creation and transfer of knowledge. This appeal stems from the growing need to combine a detailed analysis of how innovative processes really unfold with a theoretical framework that holds good at national, industry and firm level. (Nonaka and Takeuci, 1995) In order to accomplish such a challenging objective, the author proposes to revise the concept of size and, in particular, the large/small dichotomy which, if applied indiscriminately, may obscure important facts and can therefore be misleading. The paper discusses the assumption that there exist two 'ideal' but conflicting prototypes around which innovative processes and the creation of new knowledge are articulated: on one side is ranged the large firm or large organization, with its vast fund of resources and its store of gradually accumulated skills, both deemed to be crucial strengths; on the other side stands the small firm, with its gear-shifting flexibility and its mould-breaking boldness. By examining processes of decomposition and modularisation involving large firms, the author argues that things are no longer quite so clear-cut and that a new synthesis needs to be attempted. More specifically, the paper analyses experiments in production and research and development where small and large get combined by means of new (modular) organisational forms. Manufacturing cells and spin-offs-which are discussed in the paper through a case-study approach-are just two possible unconventional attempts to combine the strengths of seemingly alternative approaches to design and implementation. Such a new way of decomposing the organisational structure entails several consequences for the governance of the firm and demands to address several issues.