An Efficient Frontier in Organization Design: Organizational Structure As a Determinant of Exploration and Exploitation
Organization Science, 2013, 24(4) 1083-1101
43 Pages Posted: 23 Feb 2008 Last revised: 29 May 2014
Date Written: July 10, 2012
This paper develops a parsimonious process-level theory that connects organizational structure to exploration and exploitation. Toward this end, it develops a mathematical model of organizational decision making that combines an information processing approach in the spirit of Sah and Stiglitz (1986) with elements from signal detection theory. The model is first used to explore a "design space" of organizations and identify trade-offs and dominance relationships among alternative organization designs. The paper then studies open questions in the organization design literature, such as the extent to which exploration and exploitation can be produced by one organization and what is the effect of organization size on exploration. More broadly, this research speaks to calls for introducing more process-level explanations in the organizations literature. The paper concludes with testable hypotheses and managerially relevant insights.
Keywords: Organization Design, Contingency Theory, Type I Error, Type II Error, Innovation, Speed
JEL Classification: D81, D23, D71, D73
Suggested Citation: Suggested Citation