The document discusses how a firm's routines can indicate its ability to scale up and grow. As firms grow, they must transform from informal teams to well-organized bureaucracies through redesigning routines, infrastructure, and systems. Firms using improvised or quasi-illegal routines engaged in "bricolage" are not well-positioned for growth. Instead, during quiet periods firms should redesign routines to automate processes, reduce costs, and develop a culture prepared for innovation and growth. Redesigning routines can prepare firms for subsequent expansion by enhancing efficiency and organizational capabilities.

1. European Commission, Joint Research Centre
The nature of a firm’s routines can help evaluate a firm’s
ability to scale up and grow. Growing firms need to
fundamentally transform: from being an informal
entrepreneurial team to a well-organized bureaucracy
characterized by monitoring, delegation, and efficient
coordination (Greiner, 1998). Growing firms need to enlarge
their infrastructure, for example by redesigning their IT
systems and setting up centralized human-resource-
management systems.
Firms that engage in bricolage (Baker and Nelson, 2005), in
contrast, might use non-standard inputs (e.g. bargains
salvaged from second-hand markets), or behave in ways that
are not entirely legal (e.g. high levels of harmful emissions,
dubious hygiene, or questionable accounting practices), but
nevertheless remain un-noticed because of their small size.
These routines might be tacit and improvised (e.g. repairing
a machine with superglue, and not operating it on hot days)
rather than planned and codified. Firms with a high variability
in their output might have difficulty in adapting to the high
standards required for export markets. Firms that have quasi-
illegal routines, and who engage in bricolage, are not well-
positioned to embark on a growth trajectory.
Firms that are operating under ‘business as usual’ conditions,
should not just ‘coast along’ even if there are no opportunities
on the horizon. Instead, quiet periods are the perfect moment
for firms to prepare themselves for subsequent growth by
redesigning their routines, in three directions:
Automation and digitization of routines
• Computers are more reliable, faster, lower error rates,
have powerful memories, and can share information easily
• Technology use can stimulate further innovation and boost
absorptive capacity
• Redesigning routines as incremental process innovations
Redesigning routines to reduce marginal costs of production
• Key role of low-cost replication for scaling up (Winter and
Szulanski, 2001).
Culture of preparedness for growth and innovation
• Awareness of growth plans and ambitions
Poised for innovation and growth:
Routines as an indicator of a firm's preparedness
-- WORK IN PROGRESS --
Alex COAD
JRC-IPTS, European Commission
OECD Blue Sky Forum on Science and Innovation Indicators, Ghent, 19-21 Sept 2016
Contact
Alex Coad
European Commission • Joint Research Centre
E-mail: Alexander.Coad@ec.europa.eu
As firms grow, they need to break out from the shadows of informality.
This means redesigning their routines to avoid duplication, better organizing their division of labour, investing proactively in
corporate infrastructure, and enhancing overall operational efficiency.
Redesigning routines can be seen as a new-to-the-firm process innovation. Firms can reshape and redesign their routines to be
better poised for growth.