A Contingency Theory of Representational Complexity in Organizations

Organization Science (Forthcoming)

45 Pages Posted: 5 Nov 2019

See all articles by Felipe A. Csaszar

Felipe A. Csaszar

University of Michigan, Stephen M. Ross School of Business

James Ostler

University of Pennsylvania - Management Department

Date Written: October 25, 2019

Abstract

A long-standing question in the organizations literature is whether firms are better-off by using simple or complex representations of their task environment. We address this question by developing a formal model of how firm performance depends on the process by which firms learn and use representations. Building on ideas from cognitive science, our model conceptualizes this process in terms of how firms construct a representation of the environment and then use that representation when making decisions. Our model identifies the optimal level of representational complexity as a function of (a) the environment's complexity and uncertainty and (b) the firm's experience and knowledge about the environment's deep structure. We use this model to delineate the conditions under which firms should use simple versus complex representations; in doing so, we provide a coherent framework that integrates previous conflicting results on which type of representation leaves firms better-off. Among other results, we show that the optimal representational complexity depends more on the firm's knowledge about the environment than it does on the environment's actual complexity.

Keywords: representation, complexity, heuristics

JEL Classification: D21, D23, D81, D83, O31, O32, C63

Suggested Citation

Csaszar, Felipe A. and Ostler, James, A Contingency Theory of Representational Complexity in Organizations (October 25, 2019). Organization Science (Forthcoming), Available at SSRN: https://ssrn.com/abstract=3475784

Felipe A. Csaszar (Contact Author)

University of Michigan, Stephen M. Ross School of Business ( email )

701 Tappan Street
Ann Arbor, MI MI 48109
United States
(734) 615 4854 (Phone)

James Ostler

University of Pennsylvania - Management Department ( email )

The Wharton School
Philadelphia, PA 19104-6370
United States

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