Complementarity Is Good for Innovation

Employees in organizations are simultaneously parts of different worlds depending on the lenses used to analyze and study their behaviors and ability to achieve specific goals. On the one hand there is the world of the formal organization, the company as it is represented in the organizational chart. On the other hand, there is the so-called company behind the chart which is given by the informal relationships through which individuals share knowledge and information among each other even though, from a formal standpoint they do not have to. In the past, scholars of organizations have offered arguments supporting the primacy of the formal organization downplaying or ignoring the informal organization, while other scholars have offered arguments and evidence supporting the primacy of the informal organization downplaying or ignoring the formal one.
In a recent study, my co-authors and I offer a balanced view of what drives individuals' ability to generate innovations by arguing for the importance of occupying both formally as well as informally, central positions in the organization. In particular we observed that individuals positioned at the center of the informal intra-organizational knowledge-sharing network who simultaneously also belonged to R&D laboratories that are most prominent and influential in the organization, had the highest innovative productivity, measured as the number of product developments and improvements they managed to obtain. This was possible thanks to the legitimacy and access to valuable resources afforded by the affiliation with the prominent laboratory, as well as the social support offered by the central position in the informal network. In addition to that, we also observed that this greater ability to develop innovations was contingent on how these inventors (central in both the formal and informal structures in the organization) distributed their ties within the informal knowledge-sharing network. In particular, 'core/core employees' that interacted with the periphery of such network tended to exhibit lower innovative productivity, while those who concentrated their knowledge-sharing ties with colleagues located in the core of the informal network achieved greater innovative productivity.

From a practical standpoint this means that once identified a small subgroup of individuals who constitute the organizational "engine," or core in how they informally share knowledge with one another, organizations should formalize these roles by assigning them to prominent organizational structures (i.e. most central units within the organizational workflow). Core units should also be encouraged to keep a focused system of network relationships gravitating around other central individuals, allocating time and effort for these relationships, particularly if the goal is to increase innovative productivity through the implementations of innovations.
This is not to say that managers should isolate their workforce in core networks, preventing them to connect with different parts of the network. Rather, the message here is one of relative focus of network relationships to counteract the tendency towards over dispersion of network time and effort in distant connections.

What matters in our study is the focus on the nature of the relationship between formal and informal structures. Rather than being alterative or substitutive, the effects of these two dimensions are independent and reinforce each other in the process through which individuals increase their innovative productivity. Our results show that formal and informal core positions do not simply co-exist and operate in parallel, but function in a multiplicative way. This means that formal and informal core positions enable individuals to leverage and mobilize not simply different, but complementary types of resources that facilitate implementation activities and greater innovative outcomes (i.e. mobilizing tangible resources and, legitimacy and social support). Uncovering organizational complementarities like the one between formal and informal structures is particularly important as they have been assumed to operate mostly in disjunction from one another. Knowing how to integrate and leverage their complementarities matters for the achievement of competitive advantages for firms interested in developing innovations.