Exploring Structural Embeddedness of Product Market Activities and Resources within Business Units

Abstract

This paper explores the concept of structural embeddedness and proposes a construct, namely ‘contextual links’, which are coordination mechanisms applied to activities that may embed activities and their underlying resources within their business units. The main argument is that if activities and resources are greatly embedded in unit structures, then unit reconfiguration should have an impact on activity reconfiguration, where reconfiguration refers to movement within the firm and retention/deletion from the firm. Specifically, this study argues that if there is a significant amount of structural embeddedness, then the disruption caused by removing the contextual environment within which activities reside will lead to these activities creating less value. Theoretical support is drawn from the dynamic capabilities and organization design literatures. Activity movements are specified as default, linked, or unlinked changes. I examine, empirically, the simultaneous effects of activity and unit reconfiguration on activity retention to gain insight on structural embeddedness. Finally, I contrast activity-level and unit-level contextual links; whereas the former refers to activities embedded in units, the latter refers to units embedded in the firm. The initial findings reveal that preserving activity-level contextual links are more influential than unit-level contextual links in determining value creation from activities and their resources.

Keywords: structure, embeddedness, reconfiguration, recombination, coordination mechanisms, knowledge transfer, acquisition integration, stickiness