Mathematical models are developed using the maximum expected payoff method to determine the value of organizational structures. An information modeling approach is used to study the value added by lateral information sharing and intensity of interaction to a functional hierarchy for new product development (NPD). Similarly, a model is developed for the case of a functional hierarchy with cluster integration (grouping of functional units), which considers cluster size (number of projects times functional breadth) and the correlation of information that is exchanged between vertically organized functions. Model results are compared to industry data for NPD projects with good agreement.
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