Journal Article

An Efficient Frontier in Organization Design: Organizational Structure as a Determinant of Exploration and Exploitation

Csaszar, Felipe A.

2013

Overview

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 [Sah RK, Stiglitz JE (1986) The architecture of economic systems: Hierarchies and polyarchies. Amer. Econom. Rev. 76(4):716–727] 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 the introduction of more process-level explanations in the organizations literature. The paper concludes with testable hypotheses and managerially relevant insights.

• Publisher: INFORMS,Institute for Operations Research and the Management Sciences
• Subject: ambidexterity / Analysis / Architectural design / Business innovation / Decision making / Decision making models / Design efficiency / Dominance / Economic systems / Error rates / Exploitation / exploration and exploitation / Functional laterality / Grid organization / Hypothesis / Impact analysis / Industrial design / Information processing / Literature / Mathematical models / Matrices / omission and commission errors / organization design / Organization size / Organization theory / organizational decision making / Organizational structure / Organizations / Polyarchy / R&D / Research & development / Search engines / Signal detection / Studies / U.S.A