Research and development projects fail more often than they succeed. In fact, out of every 10 R&D projects, five are flops, three are abandoned and only two ultimately become commercial successes.1 These statistics are certainly daunting for any organization making substantial investments in R&D.

A principal problem in managing innovation is that many companies don’t know how best to organize their labs to succeed. A classic hierarchical structure, for instance, tends to impede the rapid spread of knowledge. Its inefficiencies can be absorbed, to a degree, by allowing informal structures, such as social networks, to compensate. An alternative structure is the matrix organization, but it too has its shortcomings. Matrix organizations can suffer from information logjams, confusion and conflict, with the overlap of responsibilities resulting in “turf battles and a loss of accountability.”2 These sentiments have been echoed in a recent survey of new organizational forms by The Economist magazine.3 The conundrum remains: What type of organizational design will create and sustain a learning organization in which people share knowledge quickly and willingly, a design that will successfully address the tension between too little versus too much structure?

To answer this question, I conducted an in-depth study of six R&D projects at the laboratory of a Fortune 500 corporation (henceforth referred to as “Global East”). Among other factors, I investigated the social networks at the facility. (See “About the Research.”) Employees tend to form different informal networks depending on the types of relationships they maintain and the content of the information they exchange. These include friendship networks, professional-advice relationships, gossip-exchange circles and so on. In my research, I was concerned with the effect of multiple social networks on R&D projects and with the content of the information and communication flow that is specific to a technical environment. I was especially interested in the relation between the informal social networks and the formal organizational structures in place.