The authors analyze the coercive and mimetic conditions leading to the establishment of investor relations departments among Fortune 500 industrial firms during the 1984–1994 period. The results show that antimanagement resolutions brought to a vote by social movement activists significantly contributed to the establishment of investor relations departments. Intense scrutiny by financial analysts also impelled firms to create such departments. Whereas social movement activists framed shareholder rights as a problem and compelled organizations to uphold them, professional analysts subtly coerced organizations to signal their commitment to investor rights by creating boundary-spanning structures. That solution was transmitted through board interlocks to other organizations.
We advance arguments for why and how a coevolutionary perspective and framework of analysis can provide a new lens and new directions for research in strategic management and organization studies. We identify the distinguishing properties of coevolution in an attempt to define coevolutionary research from other evolutionary research in social sciences. We also outline and discuss the empirical challenges and requirements for undertaking research within coevolutionary inquiry systems. In particular we stress the relevance of specifying coevolutionary models for reframing the selection adaptation standoff when applied to research on organization change over time, in general, and specifically to the mutation and emergence of new organizational forms. Furthermore, a coevolutionary framework has the potential to bridge and reintegrate strategy and organization theory teaching and research within a holistic framework. In our view such a reintegration is the sine qua non for studying organizational change over time and parallels the world of management practice where organization adaptations and strategy are intertwined and interdependent processes.
Complex organizations exhibit surprising, nonlinear behavior. Although organization scientists have studied complex organizations for many years, a developing set of conceptual and computational tools makes possible new approaches to modeling nonlinear interactions within and between organizations. Complex adaptive system models represent a genuinely new way of simplifying the complex. They are characterized by four key elements: agents with schemata, self-organizing networks sustained by importing energy, coevolution to the edge of chaos, and system evolution based on recombination. New types of models that incorporate these elements will push organization science forward by merging empirical observation with computational agent-based simulation. Applying complex adaptive systems models to strategic management leads to an emphasis on building systems that can rapidly evolve effective adaptive solutions. Strategic direction of complex organizations consists of establishing and modifying environments within which effective, improvised, self-organized solutions can evolve. Managers influence strategic behavior by altering the fitness landscape for local agents and reconfiguring the organizational architecture within which agents adapt.
This paper begins to answer the call to broaden current theories of individual decision-making by including in them the effects of human mood. Grounding our arguments in psychological literature on the effects of mood on information processing, motivation, and decision heuristics, we develop hypotheses about how mood can significantly affect individuals' use of structured decision protocols. In support of our hypotheses, results from an experimental study of complex decision-making suggest that, in situations where a structured decision protocol is the usual method of decision-making, individuals in moderately negative moods are significantly more likely than those in moderately positive moods to: (1) carefully execute all the steps of a structured decision protocol, (2) execute the steps of a structured decision protocol in the correct order, and (3) rely on the outcome of the structured decision protocol as the primary basis for the decision. We discuss these findings in terms of their implications for both organizational decision models and psychological models of mood and decision-making. In general, our findings help establish mood as an important variable in models of organizational decision-making and help shed light on often conflicting findings about the benefits of positive vs. negative mood for individual decision-making.
In a study of how an R&D group in a Japanese firm adopted and used a new electronic medium, we identified two contrasting patterns of use: the use of community-wide communication types, or genres, deliberately shaped by the action of a small, sanctioned group of mediators; and the use of local genres tacitly shaped by members within their own research teams. We suggest that these patterns reflect the more general processes of explicit and implicit structuring, resulting in both the reinforcement and change of social interaction within communities. Explicit structuring included the planned replication, planned modification, and opportunistic modification of existing genres, while implicit structuring included the migration and variation of existing genres. We believe that these two processes provide suggestive models for understanding the initial and ongoing use of new electronic media within a community.
This paper treats organizations as adaptive systems that have to match the complexity of their environments. The nature of this complexity is analyzed by linking an institutional Information-Space (I-Space) framework to the work of complexity theorists. The I-Space framework identifies the codification, abstraction, and diffusion of information as cultural attributes. Codification involves the assignment of data to categories, thus giving them form. Abstraction involves a reduction in the number of categories to which data needs to be assigned for a phenomenon to be apprehended. Information is diffused through populations of data-processing agents, thus constituting the diffusion dimension. Complexity theorists have identified the stability and structure of algorithmic information complexity in a way that corresponds to levels of codification and abstraction. Their identification of system parts and the richness of cross-coupling draws attention to the fabric of information diffusion. We discuss two modes of adaptation to complex environments: complexity reduction and complexity absorption. Complexity reduction entails getting to understand the complexity and acting on it directly, including attempts at environmental enactment. Complexity absorption entails creating options and risk-hedging strategies, often through alliances. The analysis, and its practical utility, is illustrated with reference to China, the world's largest social system. Historical factors have shaped the nature of complexity in China, giving it very different characteristics than those typical of Western industrial countries. Its organizations and other social units have correspondingly handled this complexity through a strategy of absorption rather than the reduction strategy characteristic of Western societies. Western firms operating in China therefore face a choice between maintaining their norms of complexity reduction or adopting a strategy of complexity absorption that is more consistent with Chinese culture. The specifics of these policy alternatives are explored, together with their advantages and disadvantages. The paper concludes with the outlines of a possible agenda for future research, focusing on the investigation of complexity-handling modes and the contingencies which may bear upon the choice between them.
This paper proposes a theory of firm boundaries based on fore-knowledge development and exploitation in speculative or “informed” trading. Foreign exchange trading provides this study's empirical context. From research on information economics, we suggest optimal speculative trading operations are multiunit and globally dispersed. Alternatively, transaction cost economics suggests atomistic actors prevail in the market for fungible commodities like currencies. We also develop competing hypotheses about information technology's effects on foreign exchange trading operations. Speculation arguments predict that the global scope of trading operations will expand after the introduction of generic information technologies. Transaction cost economics proposes that, when atomistic actors do not prevail, trading operations will contract after this introduction. We test competing predictions with models of the expansion, contraction, and net change in a firm's global dispersion. We estimate these models with data from the population of banks worldwide engaged in interbank foreign exchange currency (FX) trading from 1974 to 1993. Our results uncover two types of firms: those that approach the atomistic actor of transaction cost economics, and those that resemble the globally dispersed multiunit configuration from our speculation discussion. These results encourage reflection on how the theory of the firm differs when firms trade to produce versus speculate.
This paper examines the problem of risk mitigation in virtual organizations (VOs). We begin by discussing risk propensity in virtual organizations, and draw on a variety of research to suggest processes important in obtaining high levels of reliable performance in VOs. From this research we identify four processes we think are important: organizational structuring and design, communication, culture, and trust. Based on existing research done in conventional and high reliability organizations (HROs), we suggest how these processes may enhance reliability in VOs. We discuss how thoughtful management of these attributes can mitigate risk, and conclude with a theoretical and research agenda for future work.