Innovation and the enemy within

Gregory Nemec

View full image

How do corporations stay relevant? By innovating. But School of Management professor Olav Sorenson says the flow of new ideas within companies is threatened by what he calls “intraorganizational provincialism”: the tendency for a corporation to splinter into a collection of smaller subunits—whose members’ allegiance is more to their subunit than to the larger company.

The crux, says Sorenson, is that “it’s the middle managers who evaluate new ideas and decide whether they merit further consideration. They’re the gatekeepers.” How are these gatekeepers affected by provincialism? To find out, Sorenson and Markus Reitzig, of the University of Vienna, reviewed data amassed by a large multinational during its 2006–08 initiative to encourage innovation. They looked at the flow of some 10,000 new ideas that arrived in the digital equivalent of the corporate suggestion box. (The study, published in the July issue of Strategic Management Journal, did not name the corporation.) About 42 percent of the proposals received a favorable rating from the middle managers evaluating them. But Sorenson and Reitzig discovered that the managers rated ideas coming out of their own subunits significantly higher than those from other subunits—almost 16 percent above the baseline rate.

“It’s a subtle psychological bias,” says Sorenson. He suggests “embracing this bias” by putting middle managers in charge of evaluating only those proposals coming from their own subunits. They can then serve as advocates during subsequent evaluation rounds.