Knowledge that Transforms

Herein we argue that different diversification strategies are associated with different sets of economic benefits. Firms that have diversified into related areas can realize benefits from economies of scope, while those that have diversified into unrelated areas can realize benefits from efficient internal governance mechanisms. We hypothesize that distinctly different internal organizational arrangements are required to realize these different benefits. Firms attempting to realize economies of scope need organizational arrangements that stress cooperation between business units. Firms attempting to realize economic benefits from efficient internal governance need organizational arrangements that stress competition between business units. If a diversified firm is to achieve high performance it must establish an appropriate fit between its diversification strategy on the one hand, and its organizational structure and control systems on the other. We test this thesis on 184 Fortune 1000 firms that participated in a survey of organizational arrangements. The results indicate that the appropriate fit between strategy, structure, and control systems is associated with superior performance. Firms attempting to realize economies of scope perform better if their organizational arrangements stress cooperation between business units, while firms attempting to realize economic benefits from efficient internal governance perform better if their organizational arrangements stress competition between business units.

From an organizational perspective, there are many decisions that are not strictly individual. A decision-making process may need to be distributed across multiple participants, each of whom contributes to the final decision by performing one or more tasks. A participant may be a person, a group, a team, or an artifact such as a computerized decision-support system. Computers are routinely used to support individual decision making. However, their potential for supporting distributed decision making is only beginning to be actualized. Further progress in exploring and realizing this potential can benefit greatly from a formal model that accounts for the diverse phenomena that can occur within a distributed decision maker. When considering computer-based support for distributed decision making, the issue of coordinating the multiple participants becomes the central concern. Coordination defines the structural and dynamic patterns of inter-participant relationships in an organization. It has several aspects including planning, control, and review. Planning involves task decomposition, subtask allocation and synthesis. Control indicates mediation, negotiation and execution. And review deals with performance evaluation which will then contribute to organizational learning. Moreover, coordination occurs in a context of concurrent problem-solving tasks where multiple decisions are pending simultaneously. Bits and pieces of these coordination facets have been somewhat supported by existing computer technologies, such as decision-support systems and computer-mediated communication systems. However, systematic study of such support possibilities depends on formal models of distributed decision making as organizing paradigms. In this paper, we present a model of distributed decision making that is particularly concerned with the ongoing coordination among participants in multiple simultaneously active decision processes. Basic outlines of the model are presented as an initial foundation for understanding the possibilities of computer-based support for distributed decision making. The model takes the view that an organization is dynamic in terms of its capacity for improved coordination over time and through experience. It accommodates a bidding perspective as the context for coordination. The use and adjustment of entity reputation offers a means for improved coordination over time, and for capturing the phenomenon of organizational learning.

Given the limits of the patent systems, an innovating firm faces a difficult strategic conundrum: should it license its new technology to competitors or not? If the innovating firm does not license its new technology, competitors may quickly develop their own, possibly better, version of the technology. On the other hand, if imitation of the new technology is difficult, by denying its technology to competitors the innovating firm may be able to establish a competitive advantage. If the innovating firm does license its new technology to competitors, it runs the risk of losing control over that technology (of giving away its competitive advantage to competitors). On the other hand, if competitors are able to rapidly imitate the new technology anyway, by licensing its technology the innovating firm may ensure that its version of the technology becomes the dominant design in an industry. Moreover, the innovating firm will receive royalty payments in this scenario. Given these different scenarios, what should an innovating firm do? In this paper a theoretical framework is constructed that identifies the factors that influence an innovating firm's choice between licensing and not licensing. This suggests that the speed of imitation, the extent of first mover advantages, and the transaction costs of licensing play a major role in determining the appropriate choice.

This paper presents a perspective on organizational theory called ‘autogenesis’. This perspective has a long history in both the natural and social sciences, but is suggested particularly by recent developments in the field of self-organizing systems. According to this perspective, complex social organization can be explained in terms of the interplay of three distinct types of structure: (1) deep structure, which consists of a generative grammar (rules) for organizing; (2) elemental structure, which is the manifest form taken by individual social interactions; and (3) observed structure, which is the supra-individual group or organization as perceived by an observer of the system. The implications of this perspective for expanding the scope of theory and research on social organizations in general, and the process of organizing in particular, are discussed.

This study examines the implications of vertical mergers on the risk characteristic of the merging firms. Specifically, the study focuses on three structural characteristics of the acquiring and acquired firm's market to explain the change in the systematic or environmental risk of the acquiring firm. These structural factors are the level of competition in the acquiring firm's industry, the level of competition in the acquired firm's industry, and the growth rate of the acquiring firm's industry. The findings suggest that vertical mergers are effective at reducing systematic risk particularly when the acquiring firm competes in a concentrated market. Further, this result appears to be stable across life cycle stages.

Technology champions are members of organizations presenting new technology to fellow members who are potential users. They are widely accepted as instrumental in many implementation settings. In the perspective that dominates the current literature, champions are allied with outside technology, and users are slow to adopt innovation. Much effort has gone into describing traits of champions and solving problems in the process of getting users to accept the new technology. This focus emphasizes one particular view of the champion role, and leads to a constrained set of alternatives to manage technology championing. We propose instead that champions can be seen as agents of potential users, and implementation described in terms of constructs familiar in the agency model. This approach challenges some fundamental premises in the existing literature and introduces new propositions to the research on technology champions. They address alignment of self-interest between champions and users, implicit contracts, incentives and penalties, risk-bearing, and performance evaluation.

This paper examines processes of trial-and-error learning during the development of a technological innovation by an interorganizational joint venture created expressly for developing and commercializing products from the new technology. We develop a model of adaptive learning, which incorporates elements from laboratory models of learning and applies them to the field research setting. The learning model focuses on relationships between the goals, actions, and outcomes of an innovation team within the joint venture as it develops the innovation over time, and the influences that environmental events and external interventions by resource controllers in parent companies have on the learning process. The model is tested based on a real-time longitudinal study of the development of a biomedical innovation (therapeutic apheresis) from 1983 to 1988. Different patterns of learning were observed in different periods of innovation development. Event time series analyses clearly contradict the learning model during an initial expansion period, but strongly support the model during a subsequent contraction period. Explanations for why these different patterns of organizational learning occurred over time are provided, and focus on a set of organizational structures and practices which are commonly used to manage innovation development, but which inhibit learning.

This paper explores executive succession as an important mechanism for organization learning and, thus, for organization adaptation. We argue that executive succession can fundamentally alter the knowledge, skills and interaction processes of the senior management team. These revised skills and communication processes improve the team's ability to recognize and act on changing environmental conditions. Especially in turbulent environments, succession may be critical for improving or sustaining the performance of the firm. We explore continuity and change of CEOs and their executive teams as associated with first- and second-order organization learning, which are differentially important under stable versus turbulent environmental conditions. We also link these organization learning ideas to the nature of organization evolution. A series of hypotheses link executive-team succession and strategic reorientation to subsequent organization performance. Results in a study of 59 minicomputer firms, all founded between 1968 and 1971, indicate that succession exerts a positive influence on organization performance. We also show that it is important to distinguish between CEO succession and executive-team change, which independently improve subsequent organization performance. The positive impact of succession is accentuated when it coincides with strategic reorientation. Finally we examined how longer term patterns in succession and reorientation affect organization performance. We discovered two modes of organization adaption in this turbulent industry. The most typical mode combines CEO succession, sweeping executive-team changes, and strategic reorientations. A more rare, and over the long-term more effective, adaptational mode involves strategic reorientation and executive-team change, but no succession of the CEO. Consistently high-performing organizations are managed to sustain a relatively high level of learning (through turnover of senior executives and strategic reorientation), and at the same time to maintain links with established organizational competencies (through retention of the CEO).

The impact of personnel turnover on an organization's ability to learn, and hence on its ultimate performance, is explored for organizations with different structures and different tasks. A model of organizational decision making is presented where: (1) the organization is faced with a continuous sequence of similar but not identical problems; (2) each problem is so complex that no one person has access to all of the information nor the skill to comprehend all of the information necessary to make the decision; (3) individual decision makers base their decisions on their own previous experience; and (4) there is personnel turnover. Using simulation the impact of turnover on the rate and level of learning for hierarchies and teams is examined. This research suggests that while teams in general learn faster and better than hierarchies, hierarchies are less affected by high turnover rates particularly when the task is nondecomposable. Institutionalized memory, as embodied in the memories of distributed individuals and in the advisory relationships between individuals, determines the consequences of personnel turnover.