Showing papers in "Organization Science in 2001"

Knowledge and Organization: A Social-Practice Perspective

Abstract: While the recent focus on knowledge has undoubtedly benefited organizational studies, the literature still presents a sharply contrasting and even contradictory view of knowledge, which at times is described as "sticky" and at other times "leaky." This paper is written on the premise that there is more than a problem with metaphors at issue here, and more than accounts of different types of knowledge (such as "tacit" and "explicit") can readily explain. Rather, these contrary descriptions of knowledge reflect different, partial, and sometimes "balkanized" perspectives from which knowledge and organization are viewed. Taking the community of practice as a unifying unit of analysis for understanding knowledge in the firm, the paper suggests that often too much attention is paid to the idea of community, too little to the implications of practice. Practice, we suggest, creates epistemic differences among the communities within a firm, and the firm's advantage over the market lies in dynamically coordinating the knowledge produced by these communities despite such differences. In making this argument, we argue that analyses of systemic innovation should be extended to embrace all firms in a knowledge economy, not just the classically innovative. This extension will call for a transformation of conventional ideas coordination and of the trade-off between exploration and exploitation.

The Role of Trust in Organizational Settings

Abstract: Numerous researchers from various disciplines seem to agree that trust has a number of important benefits for organizations, although they have not necessarily come to agreement on how these benefits occur. In this article, we explore two fundamentally different models that describe how trust might have positive effects on attitudes, perceptions, behaviors, and performance outcomes within organizational settings. In the first section of the article, we examine the model that has dominated the literature: Trust results in direct (main) effects on a variety of outcomes. In the second section of the article we develop an alternative model: Trust facilitates or hinders (i.e., moderates) the effects of other determinants on attitudinal, perceptual, behavioral and performance outcomes via two distinct perceptual processes. Lastly, we discuss the conditions under which each of the models is most likely to be applicable. The theory is supplemented with a review of empirical studies spanning 40 years regarding the consequences of trust in organizational settings. The theoretical framework presented in this article provides insight into the processes through which trust affects organizational outcomes, provides guidance to researchers for more accurately assessing the impact of trust, provides a framework for better understanding past research on the consequences of trust, and suggests ways that organizational settings can be modified to capitalize on high levels of trust or mitigate the effects of low levels of trust.

Agency Relationships in Family Firms: Theory and Evidence

Abstract: Does owner management necessarily eliminate the agency costs of ownership? Drawing on agency literature and on the economic theory of the household, we argue that private ownership and owner management expose privately held, owner-managed firms to agency threats ignored by Jensen's and Meckling's (1976) agency model. Private ownership and owner management not only reduce the effectiveness of external control mechanisms, they also expose firms to a "self-control" problem created by incentives that cause owners to take actions which "harm themselves as well as those around them" (Jensen 1994, p. 43). Thus, shareholders have incentive to invest resources in curbing both managerialand owner opportunism. We extend this thesis to the domain of the family firm. After developing hypotheses which describe how family dynamics and, specifically, altruism, exacerbate agency problems experienced by these privately held, owner-managed firms, we use data obtained from a large-scale survey of family businesses to field test our hypotheses and find evidence which suggests support for our proposed theory. Finally, we discuss the implications of our theory for research on family and other types of privately held, owner-managed firms.

The Mutual Knowledge Problem and Its Consequences for Dispersed Collaboration

Abstract: This paper proposes that maintaining "mutual knowledge" is a central problem of geographically dispersed collaboration and traces the consequences of failure to do so It presents a model of these processes which is grounded in study of thirteen geographically dispersed teams Five types of problems constituting failures of mutual knowledge are identified: failure to communicate and retain contextual information, unevenly distributed information, difficulty communicating and understanding the salience of information, differences in speed of access to information, and difficulty interpreting the meaning of silence The frequency of occurrence and severity of each problem in the teams are analyzed Attribution theory, the concept of cognitive load, and feedback dynamics are harnessed to explain how dispersed partners are likely to interpret failures of mutual knowledge and the consequences of these interpretations for the integrity of the effort In particular, it is suggested that unrecognized differences in the situations, contexts, and constraints of dispersed collaborators constitute "hidden profiles" that can increase the likelihood of dispositional rather than situational attribution, with consequences for cohesion and learning Moderators and accelerators of these dynamics are identified, and implications for both dispersed and collocated collaboration are discussed

Networks, Diversity, and Productivity: The Social Capital of Corporate R&D Teams

Abstract: We argue that the debate regarding the performance implications of demographic diversity can be usefully reframed in terms of the network variables that reflect distinct forms of social capital. Scholars who are pessimistic about the performance of diverse teams base their view on the hypothesis that decreased network density--the average strength of the relationship among team members--lowers a team's capacity for coordination. The optimistic view is founded on the hypothesis that teams that are characterized by high network heterogeneity, whereby relationships on the team cut across salient demographic boundaries, enjoy an enhanced learning capability. We test each of these hypotheses directly and thereby avoid the problematic assumption that they contradict one another. Our analysis of data on the social networks, organizational tenure, and productivity of 224 corporate R&D teams indicates that both network variables help account for team productivity. These findings support a recasting of the diversity-performance debate in terms of the network processes that are more proximate to outcomes of interest.

Teamwork Quality and the Success of Innovative Projects: A Theoretical Concept and Empirical Evidence

Abstract: An extensive body of literature indicates the importance of teamwork to the success of innovative projects. This growing awareness, that "good teamwork" increases the success of innovative projects, raises new questions: What is teamwork, and how can it be measured? Why and how is teamwork related to the success of innovative projects? How strong is the relationship between teamwork and various measures of project success such as performance or team member satisfaction? This article develops a comprehensive concept of the collaboration in teams, called Teamwork Quality (TWQ). The six facets of the TWQ construct, i.e., communication, coordination, balance of member contributions, mutual support, effort, and cohesion, are specified. Hypotheses regarding the relationship between TWQ and project success are tested using data from 575 team members, team leaders, and managers of 145 German software teams. The results of the structural equation models estimated show that TWQ (as rated by team members) is significantly associated with team performance as rated by team members, team leaders, and team-external managers. However, the magnitude of the relationship between TWQ and team performance varies by the perspective of the performance rater, i.e., manager vs. team leader vs. team members. Furthermore, TWQ shows a strong association with team members' personal success (i.e., work satisfaction and learning).

Market, Hierarchy, and Trust: The Knowledge Economy and the Future of Capitalism

Abstract: Recent conceptualizations of trends in the structure of U.S. industry have focused on the relative importance of markets, hierarchies, and hybrid intermediate forms. This paper advances the discussion by distinguishing three ideal-typical forms of organization and their corresponding coordination mechanisms: market/price, hierarchy/authority, and community/trust. Different institutions combine the three forms/mechanisms in different proportions. Economic and organizational theory have shown that, compared to trust, price and authority are relatively ineffective means of dealing with knowledge-based assets. Therefore, as knowledge becomes increasingly important in our economy, we should expect high-trust institutional forms to proliferate.A review of trends in employment relations, interdivisional relations, and interfirm relations finds evidence suggesting that the effect of growing knowledge-intensity may indeed be a trend toward greater reliance on trust. There is also reason to believe that the form of trust most effective in this context is a distinctively modern kind--"reflective trust"--as opposed to traditionalistic, "blind" trust. Such a trend to reflective trust appears to threaten the privileges of currently dominant social actors, and these actors' resistance, in combination with the complex interdependencies between price, authority, and trust mechanisms, imparts a halting character to the trend. But the momentum of this trend nevertheless appears to be self-reinforcing, which suggests that it may ultimately challenge the foundations of our capitalist form of society while simultaneously creating the foundations of a new, postcapitalist form.

Replication as Strategy

Abstract: Replication, a familiar phenomenon sometimes referred to as the "McDonalds approach," entails the creation and operation of a large number of similar outlets that deliver a product or perform a service. Companies pursuing this strategy are now active in over 60 industries. Although replicators are becoming one of the dominant organizational forms of our time, they have been neglected by scholars interested in organizations. As a result of this neglect, replication is typically conceptualized as little more than the exploitation of a simple business formula. Such a view clouds the strategic subtlety of replication by sidestepping the exploration efforts to uncover and develop the best business model as well as the ongoing assessment that precedes large-scale replication of it. Empirical evidence supports an alternative view of replication strategy as a process that involves a regime of exploration in which the business model is created and refined, followed by a phase of exploitation in which the business model is stabilized and leveraged through large-scale replication.In this paper we present the key elements of a theory of replication strategy. We discuss key aspects of a replication strategy, namely the broad scope of knowledge transfer and the role of the central organization, and the analytical concepts of template and Arrow core as a preamble for specifying hypotheses about the conditions under which a replication strategy is more likely to succeed in a competitive setting. Replication strategy provides unusually transparent examples of the process of leveraging knowledge assets; we exploit this in our concluding discussion.

Bringing Work Back In

Abstract: In this essay we argue that organization theory's effort to make sense of postbureaucratic organizing is hampered by a dearth of detailed studies of work. We review the history of organization theory to show that, in the past, studies of work provided an empirical foundation for theories of bureaucracy, and explain how such research became marginalized or ignored. We then discuss methodological requirements for reintegrating work studies into organization theory and indicate what the conceptual payoffs of such integration might be. These payoffs include breaking new conceptual ground, resolving theoretical puzzles, envisioning organizing processes, and revitalizing old concepts.

An Empirical Investigation of the Effect of Market Orientation and Entrepreneurship Orientation Alignment on Product Innovation

Abstract: This article develops a concept of an alignment between market and entrepreneurship orientations and reports the results of a study designed to investigate its effect on a firm's product innovation. A sample of 181 firms was classified into four categories labeled as market/entrepreneurship orientation (ME), entrepreneurship orientation (EO), market-oriented (MO), and conservative (CO) firms. One-way ANOVA and planned contrast tests (PCT) were used to identify whether or not specific product innovation decisions, activities, and performance vary across the groups. The results indicate that these groups of firms significantly differ with respect to both subjective and objective measures of new product performance, and with product innovation strategies and activities pertaining to timing of market entry, product quality, marketing synergy, proficiency of market launch, and management support for innovation. Further, the findings suggest that these groups of firms are not significantly different with respect to perceived environmental hostility and intensity of market competition. This finding suggests that the groups of firms are robust across environments and that the findings presented in this study are not an artifact of environmental variation. Managerial and research implications of the results are discussed.

Technological Innovation in the Pharmaceutical Industry: The Use of Organizational Control in Managing Research and Development

Abstract: The literature on the management of R&D professionals strongly advocates managing R&D projects on a project-by-project basis. This literature suggests that projects should be managed differently depending upon project characteristics such as risk, ambiguity, and nonroutineness. While the primary emphasis of the R&D professional literature has been on project teams, the purpose of this study is to examine the impact of organization-wide controls on innovativeness at the firm level.In a sample of 57 pharmaceutical firms, this study investigates the influence of organizational controls on the research and development activities of R&D professionals. This study is one of a handful of studies that simultaneously explores the use of input, behavior, and output controls. Two categories of innovation are considered as dependent variables: incremental innovations in the form of drug enhancements and radical innovations in the form of new drugs. Contrary to existing theory and hypotheses developed in this study, the results show that input, behavior, and output control enhanced radical innovation, and input and output controls enhanced incremental innovation.These results challenge several important features of existing models of R&D management and diverge from common beliefs about R&D management at the project level. While it is commonly accepted that incremental and radical innovation should be managed differently, the results of this study suggest otherwise. In this instance, the management of R&D activities may be considered more similar than previously thought.

Interfirm Rivalry and Managerial Complexity: A Conceptual Framework of Alliance Failure

Abstract: Empirical research indicates that more than half of strategic alliances fail, and the outcomes of alliance failure can be devastating. Despite the increased concern about managing strategic alliances, the field still lacks a theoretical framework to describe the conditions and dynamics leading to the failure of strategic alliances. This paper attempts to distill, derive, and integrate theories across different disciplines into a unified framework that offers a better understanding of alliance failure. The conceptual framework focuses on two primary sources of alliance failure: interfirm rivalry and managerial complexity. We propose that strategic alliances fail because of the opportunistic hazards as each partner tries to maximize its own individual interests instead of collaborative interests. Also, strategic alliances fail because of the difficulties in coordinating two independent firms (i.e., coordination costs), and in aligning operations at the alliance level with parent firms' long-term goals (i.e., agency costs). The paper extends the theoretical framework by looking into a process model of alliance development and failure.

The Assimilation of Knowledge Platforms in Organizations: An Empirical Investigation

Abstract: The ability to integrate dispersed pockets of expertise and institute an organizational repository of knowledge is considered to be vital for sustained effectiveness in contemporary business environments. Information technologies provide cost-effective functionalities for building knowledge platforms through systematic acquisition, storage, and dissemination of organizational knowledge. However, in order to gain the value-adding potential of organizational knowledge, it is not sufficient to simply adopt and deploy IT-enabled knowledge platforms. These platforms must be assimilated into the ongoing work processes in organizations. Yet, theories of technology innovation and use suggest that a variety of institutional, social, and political factors blend together in influencing the extent to which complex information technologies are actually assimilated into organizational practice. Therefore, this research addresses a significant question: What forces influence the assimilation of knowledge platforms in organization? Given the significant gap between the adoption and actual assimilation of complex technologies into organizations, this is an important question. Empirical evidence is generated by examining the forces influencing the assimilation of CASE technologies in systems development projects in organizations. CASE is considered to be one of the most mature knowledge platforms in contemporary organizations. The empirical evidence sheds light on the role of institutional forces that influence the rate of assimilation of the technology. The findings have significant implications for further research and practice.

Not All Events Are Attended Equally: Toward a Middle-Range Theory of Industry Attention to External Events

Abstract: This paper builds on prior theory and research on attention and identity to examine whether and how industries publicly attend to external events. Events are critical triggers of institutional transformation and industry evolution. However, they must first become the focus of public attention to have this effect. We draw on a paired case comparison of media coverage of eight nonroutine events affecting the natural environment and the U.S. chemical industry. We employ both deductive and inductive analysis to develop a model and hypotheses to explain two research questions. First, what determines the initial public attention to an event? Second, when and why do certain events attain high and sustained levels of industry attention? A key inference is that whether an event receives industry-level attention depends on either outsiders holding the industry accountable for the event, or insiders' internal concerns with the industry image. We further infer that an event can be transformed into a critical issue for an industry, warranting sustained attention, if there is contestation with outsiders over the accountability for the event and its enactment, and internal contradictions and challenges to the industry's identity.

How Organizational Resources Affect Strategic Change and Performance in Turbulent Environments: Theory and Evidence

Abstract: This study examines how historical resource endowments and competencies affect strategic change and its outcomes amid environmental turbulence. Drawing from both behavioral and economics-based literatures, we develop four distinct perspectives regarding the likely effect of resources on strategic change. These four perspectives offer alternative predictions about how and why resource endowments should affect the likelihood or magnitude of strategic change, and how and why they should moderate the relation between strategic change and performance. We examine the predictive power of these four alternative arguments using extensive longitudinal data from a single industry context characterized both by substantial resource heterogeneity and environmental turbulence. Results indicate that organizations possessing greater stocks of historically valuable resources were much less likely to engage in adaptive strategic change, but also that this resource-driven disinclination towards change tended to have a benign or even beneficial effect on performance. We discuss the implications of our theory and findings for the strategic change literature and also for the literature on the resource-based view of the firm.

Adaptation as Information Restriction: The Hot Stove Effect

Abstract: Individuals and social systems are often portrayed as risk averse and resistant to change. Such propensities are characteristically attributed to individual, organizational, and cultural traits such as risk aversion, uncertainty-avoidance, discounting, and an unwillingness to change. This paper explores an alternative interpretation of such phenomena. We show how the reproduction of successful actions inherent in adaptive processes, such as learning and competitive selection and reproduction, results in a bias against alternatives that initially may appear to be worse than they actually are. In particular, learning and selection are biased against both risky and novel alternatives. Because the biases are products of the tendency to reproduce success that is inherent in the sequential sampling of adaptation, they are reduced whenever the reproduction of success is attenuated. In particular, when adaptation is slowed, made imprecise, or recalled less reliably, the propensity to engage in risky and new activities is increased. These protections against the error of rejecting potentially good alternatives on inadequate experiential evidence are costly, however. They increase the likelihood of persisting with alternatives that are poor in the long run as well as in the short run.

Capabilities as Real Options

Abstract: Strategy research consists of a balance between positive and normative theory. Normative theories suggest particular heuristics, or cognitive representations, to find appropriate solutions. Heuristics permit faster solutions to real-time problems; they also suffer from the potential of negative transfer to inappropriate applications.The theory of real options provides the appropriate heuristic framing of competencies and exploratory search. A real options approach marries the theory of financial options to foundational ideas in strategy, organizational theory, and complex systems. We join these approaches to identify three pairs of concepts: scarce factor and the underlying asset in option theory, inertia and irreversibility, and the ruggedness of landscape and option values. Strategic theories of resources largely define a core competence as unique and nonimmutable. In doing so, this definition has wrongly forgotten Barney's initial insight into scarce factor markets as determining the valuation of a competitive asset. Financial theory of real options derives its heuristics of investing in exploratory search by inferring future value of today's investments from market prices.We apply the three conceptual pairs to the evaluation of capabilities as real options through a formal descriptive model. The valuation of core capabilities is derived from observing the price dynamics of correlated strategic factors in the market. Because of inertia, managers cannot easily adjust the wrong set of organizational capabilities to the emergence of market opportunities. However, firms that have made investments in capabilities appropriate to these opportunities are able to respond. From this description, we define core competence as the choice of capabilities that permits the firm to make the best response to market opportunities. The heuristic framing of capabilities as real options guides the normative evaluation of the balance between exploitation and exploration.

The Dynamics of Alignment: Insights from a Punctuated Equilibrium Model

Abstract: Several prior articles have emphasized the importance of alignment between business and information system (IS) strategies, and between business and IS structures. Seeking to advance our understanding of alignment, we examine the dynamics of changes in alignment through strategy/structure interactions in the business and IS domains. More specifically, we address the following question:In what ways does alignment evolve over time? Changes in the strategic IS management profile (which includes business strategy, IS strategy, business structure, and IS structure) over time are examined using a punctuated equilibrium model, involving long periods of relative stability, or evolutionary change, interrupted by short periods of quick and extensive, or revolutionary, change. Case studies of changes in business and IS strategies and structure over long time periods in three organizations suggest that the punctuated equilibrium model provides a valuable perspective for viewing these dynamics.The cases suggest that a pattern of alignment may continue over a long period, because either the level of alignment is high or the managers do not recognize the low alignment as a problem. Revolutions, involving changes in most or all dimensions of the strategic IS management profile, interrupt the evolutionary changes. However, organizations hesitate to make such revolutionary changes in strategic IS management profiles. Complete revolutions apparently require a combination of strong triggers. Finally, post-revolution adjustments to one dimension of the strategic IS management profile seem to follow revolutionary changes.

Defining Who You Are By What You're Not: Organizational Disidentification and The National Rifle Association

Abstract: Through two exploratory studies, we develop and test an introductory framework of "organizational disidentification." Our first study explores the concept of organizational disidentification through a qualitative investigation of cognitive relationships with the National Rifle Association (NRA). Findings suggest that organizational disidentification is a self-perception based on: (1) a cognitive separation between one's identity and the organization's identity, and (2) a negative relational categorization of oneself and the organization (e.g., categorizations such as "rivals" or "enemies"). Organizational disidentification appears to be motivated by individuals' desires to both affirm positive distinctivenessand avoid negative distinctiveness by distancing themselves from incongruent values and negative stereotypes attributed to an organization. Our findings also suggest that organizational disidentification can lead individuals to take action (either volunteer work or voicing their opinion) as a result of their perceived separation from the organization's identity. Results of our second study--a large-scale survey of public attitudes about the NRA--provide support for this framework.

Reproducing Knowledge: Replication Without Imitation at Moderate Complexity

Abstract: The complexity of a firm's strategy affects both the ease with which the firm can replicate the strategy in a new setting and the ease with which rivals can imitate it. Simple strategies are as readily imitated as replicated, and highly intricate strategies resist imitation and replication equally. At moderate levels of complexity, however, a wedge develops between the ease of replication and the difficulty of imitation, so long as the replicator has better information than the imitator about the original success. An agent-based simulation model clarifies the structural reasons that this is so. The model also shows how the wedge-maximizing level of complexity varies with the replicator's informational edge over the imitator.The results help to pinpoint situations in which strategies requiring replication are likely to defy imitation and generate sustained competitive advantage. More generally, the analysis sheds light on the value of superior but imperfect information about good solutions to hard problems. Finally, the results suggest that a pattern long observed by organization scholars--that "loosely coupled organizations" are especially effective competitors--may arise for a very different reason than is normally posited.

Top Management Team Heterogeneity: Personality, Power, and Proxies

Abstract: This article reports partial results of an eight-year field study of the Top Management Teams (TMTs) of a global multidivisional financial services corporation and compares those results with large-sample work in the TMT literature. In particular, it investigates the operationalization of TMT cognitive diversity by the proxies of age, team tenure, industry experience, and functional background heterogeneity most often used in statistical work, and compares those operationalizations with cognitive diversity itself. In addition to highlighting which proxies seemed to most closely approximate cognitive diversity and why, it demonstrates the confounding impact of power on all operationalizations. A comparison of the field results with three representative studies with respect to the operationalization of the dependent variables of diversification, innovation, and performance helps to explain why previous TMT heterogeneity research has often produced inconsistent results or nonfindings. It offers some suggestions that should improve the robustness of statistical research and demonstrates the reciprocal usefulness of case and large-sample research.

Organizational Environments in Flux: The Impact of Regulatory Punctuations on Organizational Domains, CEO Succession, and Performance

Abstract: A central debate in organizational theory concerns how organizations evolve. There are two diametrically opposing viewpoints. Adaptation theories predict that change occurs as fluid organizations adjust to meet shifting environmental demands, while selection theories predict that change occurs through the differential selection and replacement of inert organizations as environmental demands vary over time. Our paper bridges these polar opposites by using a punctuated equilibrium framework to examine organizations' responses to discontinuous industry-level change. This framework recognizes that the histories of many industries are occasionally punctuated by dramatic exogenous shocks, such as radical technological innovation, social and political turmoil, major changes in government regulation, and economic crashes. Our central thesis is that such environmental punctuations dramatically reduce pressures and rewards for organizational inertia and thereby alter both organizations' propensities for change and their survival chances following change.We focus on one form of punctuation, major regulatory change, and study firms in two industries: general hospitals and savings and loan associations. For organizations in both industries, we examine three important outcomes: shifts in organizational domain, CEO succession, and changes in financial performance. Our analyses show that punctuational regulatory change prompts shifts in organizational domains and executive leadership. Additionally, post-punctuation domain change and post-punctuation CEO succession both affect subsequent performance. We discuss our results in light of current thinking about the content and process effects of core organizational change, which has been developed in the context of stable environments. Finally, we argue for the development of more temporally sensitive theories of organizational action.

How Leaders Foster Self-Managing Team Effectiveness: Design Choices Versus Hands-on Coaching

Abstract: This multi-method field study examines the relative effects of two kinds of leader behaviors--design choices and hands-on coaching--on the effectiveness of self-managing teams. Findings show that how leaders design their teams and the quality of their hands-on coaching both influence team self-management, the quality of member relationships, and member satisfaction, but only leaders' design activities affect team task performance. Moreover, design and coaching interact, so that well-designed teams are helped more by effective coaching--and undermined less by ineffective coaching--than are poorly designed teams.

Understanding Strategic Learning: Linking Organizational Learning, Knowledge Management, and Sensemaking

Abstract: Strategic learning aims to generate learning in support of future strategic initiatives that will, in turn, foster knowledge asymmetries that can lead to differences in organizational performance. From a case study of a unique organization whose purpose is to facilitate strategic knowledge distillation, it was found that this process is characterized by targeted information gathering that relies on diverse experts for interpretation as well as validation. It also embodies the organizational capability to leverage information technologies in the distillation effort, integrating them with processes for generating, storing, and transporting rich, de-embedded knowledge across multiple levels of the organization. As a result of the case study, a model of the strategic learning is developed and a series of propositions regarding its context and processes are presented based on this model. The model highlights key dimensions of strategic learning that suggest design parameters for organizations building strategic learning systems.

Real Options Analysis and Strategic Decision Making

Abstract: The real options approach is frequently advocated as an approach that offers a positive and radical reassessment of the value of risk and exploration. We examine a recent case where Merck used the real options approach to justify an investment in an R&D project. This case is used to highlight some of the problems associated with using real options. We note that the assumptions incorporated in most standard option valuation models can conflict with the conclusions reached by strategic analysis. As a result, users of real options models should understand the quantitative aspects of these models, and may often need to create a customized model for each situation. The difficulty of developing customized models may explain, in part, the limited use of the real options approach in strategic analysis.

Keiretsu, Governance, and Learning: Case Studies in Change from the Japanese Automotive Industry

Abstract: Thekeiretsu structuring of assembler-supplier relations historically enabled Japanese auto assemblers to remain lean and flexible while enjoying a level of control over supply akin to that of vertical integration. Yet currently there is much talk of breakdowns inkeiretsu networks. This paper examines some recent developments in Japanese parts-supplykeiretsu.We argue thatkeiretsu relationships are drifting from "hybrid" or "network" (i.e.,keiretsu) governance modes toward the extremes of arms-length contracting and top-down administration. These changes are best understood through a combination of transaction cost and learning perspectives on alliance. Consistent with transaction-cost economics, the shift in purchase-supply relationships can be traced to changes in the nature of parts transactions andkeiretsu-governance structures. A learning perspective on alliance complements and extends transaction-cost theory, providing additional explanation of the sources of change and the specific governance choices being made.Our first two cases document a drift in Toyota'skeiretsu supply network toward a hierarchical form in the management of parts-supply transactions. Toyota has effectively internalized its transactions with Daihatsu by taking a controlling interest. Toyota's strategy toward long-term partner Denso, on the other hand, was very different. Toyota built, from the ground up, an in-house capability in electronic components, thus scaling down its dependence on Denso. A third case considers a general trend in the Japanese auto industry toward greater standardization of parts. With the routinization of quality, reliability, and speed in supply management, the need forkeiretsu-style governance has declined. The withering ofkeiretsu obligations is also traceable to globalization and the continuing weakness of the Japanese economy, which have prompted Japanese firms to question received business practice.

About Authors

Abstract: Catherine Durnell Cramton (\"The Mutual Knowledge Prob- conditions, the impact of organizational change on subsequent lem and Its Consequences for Dispersed Collaboration\") is Asso- performance and survival, and the consequences of organizational ciate Professor in the School of Management at George Mason structures and dynamics for employees\' careers and the compo- University. She recieved her Ph.D. in organizational behavior from sition of organizations\' work forces. She serves on the editorial Yale University. Her research explores the contemporary chal- boards of Organization Science, Administrative Science Quar- lenges of collaboration and leadership, including distributed work, terly, and the American Sociological Review. Address: Columbia interorganizational collaboration, project team leadership, and the University, Graduate School of Business, 706 Uris Hall, New impact of technology on collaboration. Address: School of Man- York, NY 10027-6902; telephone: (212) 854-4424; e-mail: agement, Mail Stop 5F5, George Mason University, Fairfax, VA hah15@columbia.edu . 22030-4444; telephone: (703) 993-1814; fax: (202) 318-4319; John C. Henderson (\"Understanding `Strategic Learning\': e-mail: ccramton@som.gmu.edu . Linking Organizational Learning, Knowledge Management, and Sue R. Faerman (\"Understanding Interorganizational Cooper- Sensemaking\") is the Richard C. Shipley Professor of Manage- ation: Private-Public Collaboration in Regulating Financial Market ment, Chairperson of the Information Systems Department, and Innovation\") is Professor of Public Administration and Organiza- Director of the Institute for Leading in a Dynamic Economy at tional Studies and Dean of Undergraduate Studies at the University Boston University\'s School of Management. He is a noted at Albany, State University of New York. Her research focuses on researcher, consultant, and executive educator with papers appear- the paradoxical nature of leadership and organizational perfor- ing in many refereed journals. His coauthored book, Knowledge mance. She received her Ph.D. in public administration from the Engine, examines leveraging a firm\'s knowledge assets. His University at Albany, State University of New York. Address: research interests include: managing strategic partnerships, impact Office of Undergraduate Studies-LC30, University at Albany, of the mobile Internet on markets and organizations, and knowl- State University of New York, 1400 Washington Avenue, Albany, edge management. Address: Boston University School of Man- NY 12222; telephone: (518) 442-3950; fax: (518) 442-4959; e-mail: agement, 595 Commonwealth Avenue, Room 546H, Boston, MA sfaerman@uamail.albany.edu . 02215; telephone: (617) 353-6142; fax: (617) 353-1695; e-mail: James F. Fairbank (\"Emulation in Academia: Balancing Struc- jchender@bu.edu . ture and Identity\") received his Ph.D. in management and organi- Giuseppe (Joe) Labianca (\"Emulation in Academia: Balancing zation, The Pennsylvania State University and is an assistant pro- Structure and Identity\") received his Ph.D. in management and or- fessor of management in the College of Business and Economics ganization, The Pennsylvania State University, and is an assistant at West Virginia University in Morgantown, WV. His current re- professor of organization and management at Emory University\'s search interests are strategic decision making and the management Goizueta Business School in Atlanta, GA. His primary interests are of information technology. Address: College of Business and Eco- in network and cognition research at the intra- and interorganiza- nomics, P.O. Box 6025, Morgantown, WV 26506-6025; telephone: tional levels. Recent projects have investigated the antecedents and (304) 293-7937; fax: (304) 293-5652; e-mail: ifairban@wvu.edu . consequences of disliking others in one\'s social networks at work, Dennis A. Gioia (\"Emulation in Academia: Balancing Structure as well as investigating the process of emulation between organ- and Identity\") is Professor of Organizational Behavior, Department zations. He conducts both quantitative and qualitative research, and of Management and Organization, Smeal College of Business Ad- has published in the Academy of Management Journal and Orga- ministration at The Pennsylvania State University. His current nization Science. He is currently serving on the editorial review research and writing interests focus primarily on the cognitive board of the Academy of Management Journal. Address: Goizueta processes of organization members, especially the ways in which Business School, 1300 Clifton Road, Emory University, Atlanta, identity, image, and reputation are involved in organizational GA 30322; telephone: (404) 727-7662; fax: (404) 727-6663; e-mail: sensemaking, sensegiving, and change. His work has appeared joe_labianca@bus.emory.edu . in many of the top journals in the field and he has coedited two David P. McCaffrey (\"Understanding Interorganizational Co- volumes of original contributions: The Thinking Organization operation: Private-Public Collaboration in Regulating Financial and Creative Action in Organizations. Address: Smeal College of Market Innovation\") is Professor of Public Administration, Public Business, Penn State University, 403 Beam BAB, University Park, Policy, and Organizational Studies at the University at Albany, PA 16802; telephone: (814) 865-6370; fax: (814) 863-7261; e-mail: State University of New York. His research focuses on the orga- dag4@psu.edu . nizational dynamics of regulatory systems. He received his Ph.D. Heather A. Haveman (\"Organizational Environments in Flux: in sociology from the State University of New York at Stony The Impact of Regulatory Punctuations on Organizational Do- Brook. Address: Department of Public Administration and Policy, mains, CEO Succession, and Performance\") is Professor of Man- University at Albany, State University of New York, 135 Western agement at the Graduate School of Business, Columbia University. Avenue, Albany, NY 12222; e-mail: d.mccaffrey@albany.edu . She received her Ph.D. in organizational behavior and industrial Alan D. Meyer (\"Organizational Environments in Flux: The relations from the Haas School of Business Administration at the Impact of Regulatory Punctuations on Organizational Domains, University of California at Berkeley in 1990. Her research inves- CEO Succession, and Performance\") is the Charles H. Lundquist tigates organizations\' responses to shifting internal and external Professor of Entrepreneurial Management at the University of

The Illusion of Leadership: Misattribution of Cause in Coordination Games

Abstract: This paper reports the results of experiments which examine attributions of leadership quality. Subjects played an abstract coordination game which is like many organizational problems. Previous research showed that when larger groups play the game, they rarely coordinate on the Pareto-optimal (efficient) outcome, but small groups almost always coordinate on the efficient outcome. After two or three periods of playing the game, one subject who was randomly selected from among the participants to be the "leader" for the experiment was instructed to make a speech exhorting others to choose the efficient action. Based on previous studies, we predicted that small groups would succeed in achieving efficiency but that large groups would fail. Based on social psychological studies of the fundamental attribution error, we predicted that the subjects would underestimate the strength of the situational effect (group size) and attribute cause to personal traits of the leaders instead--leaders would be credited for the success of the small groups, and blamed for the failure of the large groups. This hypothesis proved true: Subjects attributed differences in outcomes between conditions to differences in the effectiveness of leaders. In a second experiment, subjects voted to replace the leaders more frequently in the large-group condition (at a small cost to themselves), showing that misattributions of leadership ability also affect actual behavior by subjects. Previous research has demonstrated a tendency to credit or blame leaders for unusual performance. The difference in our study is that subjects should be blaming a structural condition--the size of the group--but they blame the leaders instead. Thus, our experiment is the first to establish a mistaken illusion of leadership.

Supervisory Span, Relational Coordination and Flight Departure Performance: A Reassessment of Postbureaucracy Theory

Abstract: There is a rich debate in organizational theory about the contribution of supervisors to group process and performance, and about the span of control needed to make that contribution. In this paper, I summarize the debate and develop competing hypotheses. These competing hypotheses are tested using multisite survey and archival measures, and interpreted using qualitative data from the same study. I find that small supervisory spans improve performance through their positive effects on group process. In particular, supervisors with smaller spans achieved higher levels of relational coordination among their direct reports. Qualitative data suggest that supervisors with smaller spans achieved these results through working with, and providing intensive coaching and feedback to their direct reports.

Reimagining the Differentiation and Integration of Work for Sustained Product Innovation

Abstract: This study describes the image of organizing that underlies a complex organization's ability to incorporate streams of innovation with continuing operations I argue that a mechanistic organization archetype prevents people from seeing in their minds' eyes--from imagining--how to do the work of innovation organizationwide, but that theorists have failed to articulate an alternative to this archetype in its own terms The study focuses on two elements of organizing: the differentiation and the integration of work I build grounded theory for an alternate, innovative archetype of organizing by exploring the shared image of work differentiation and integration in twelve firms that vary in innovative ability I find a fundamentally different image in innovative organizations that is centered on hands-on practice: People understand value creation as a long-term working relationship with customers, in which they apply the firm's skills to anticipate and solve customer problems This practice is differentiated into distinct problems in value creation, each of which embodies the integral flow of work like a lateral slice, but which situates those problems in their own contexts People understand themselves to be organized in an autonomous community of practice that takes charge of one of the problems The communities of practice are integrated by standards for action: vivid, simple representations of value that frame work and that are reenacted in practiceThe analysis details this different image of organizing by describing four autonomous communities of practice and contrasting them with the image of organizing found in noninnovative firms The paper illustrates how this new image straightforwardly organizes and controls innovative work, and how the noninnovative image of differentiation and integration makes this work unimaginable I conclude that innovation can be incorporated with continuing operations, provided that managers and theorists reimagine the differentiation and integration of work I offer preliminary ideas for doing so, and suggest some next steps in this research stream