Searching for Structure: Formal Organization Design as a Guide to Network Evolution

Forthcoming, Management Science

INSEAD Working Paper No. 2017/41/STR

57 Pages Posted: 27 May 2017 Last revised: 24 Jun 2017

Date Written: June 22, 2017

Abstract

Is top-down organization design worth attempting at all, or should organizations simply let their members learn which patterns of interaction are valuable by themselves, through a bottom-up process? Our analysis of an agent-based computational model shows that weak enforcement of even a randomly selected formal structure in a top-down manner can usefully guide the bottom-up emergence of networks of intra-organizational interactions between agents. In the absence of formal structure, interactions are prone to decline within organizations, because maintaining interactions requires coordination but breaking them does not. Formal structure regenerates the network of interactions between agents, who can then learn which interactions to keep or discard. This “network regeneration effect” of formal structure offers a rationale for the importance of top-down organization design, even if the design is limited in accuracy and enforcement.

Keywords: Organization Design, Social Networks, Organizational Adaptation, Organizational Learning, Agent-Based Simulation

JEL Classification: L1, L2, L23, M1, D83, D85, C63

Suggested Citation

Clement, Julien and Puranam, Phanish, Searching for Structure: Formal Organization Design as a Guide to Network Evolution (June 22, 2017). Forthcoming, Management Science ; INSEAD Working Paper No. 2017/41/STR. Available at SSRN: https://ssrn.com/abstract=2974436 or http://dx.doi.org/10.2139/ssrn.2974436

Julien Clement (Contact Author)

INSEAD ( email )

Boulevard de Constance
77305 Fontainebleau Cedex
France

Phanish Puranam

INSEAD ( email )

1 Ayer Rajah Avenue
Singapore, 138676
Singapore

HOME PAGE: http://www.insead.edu/facultyresearch/faculty/profiles/ppuranam/

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