Structural Recombination and Innovation: Unlocking Intraorganizational Knowledge Synergy Through Structural Change

This paper examines how structural recombination of business units within a firm impacts subsequent firm innovation. We argue that structural recombination is both a means for firms to unlock the potential for intraorganizational knowledge recombination and a source of disruption to the firm’s existing knowledge resources, so that the overall effect of structural recombination on innovation will depend on the balance between these two effects. Structural recombination will have a positive effect on innovation where there are substantial intraorganizational knowledge synergies, where path dependence is low, and where knowledge resources are of high quality, limiting disruption. Results from a 20-year panel of 71 firms operating in the U.S. medical sector confirm these arguments. The study thus provides a contingent view of the effects of structural recombination on firm innovation while highlighting the role of structural recombination in realizing untapped knowledge synergies within the firm.