Why are small R&D 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 1980s. The author 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. 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 responding to a survey reported that they speak with customers either one or twice a year, or not at all. It is concluded that merely making R&D organizations small 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