WHY ARE SMALL RESEARCH-AND-DEVELOPMENT ORGANIZATIONS MORE PRODUCTIVE

Many R & D managers believe that small R & D organizations are more productive than large ones, a view that is reflected in the popular management literature of the 1980's. Some large corporations have established individual small, off-site facilities for new high technology ventures. This paper examines theoretical arguments for the possible advantages of smallness in R & D organizations, proposes an "ideal" product development organization using the techniques of control theory to simulate information flows, and compares the "ideal" model with survey data from five R & D organizations (a skunkworks, a corporate new venture, an autonomous profit center, and two in-house engineering departments). Although direct contact with customers has been shown to be the best source of information about new product concepts, the majority of the product development engineers and engineering managers in our survey reported that they talk with customers either once or twice a year, or not at all. Merely making R & D organizations "small"-setting up skunkworks and corporate new ventures-may prove disappointing unless careful attention is paid to organizational policies affecting communications flows, direct access to customers, opportunistic planning, and financial incentives for good performance.