2015 Award for Scholarly Contribution
Journal Article | Administrative Science Quarterly | 54 | September 2009
Optimal Structure, Market Dynamism, and the Strategy of Simple Rules
Using computational and mathematical modeling, this study explores the tension between too little and too much structure that is shaped by the core tradeoff between efficiency and flexibility in dynamic environments. Our aim is to develop a more precise theory of the fundamental relationships among structure, performance, and environment.The authors find that the structure-performance relationship is unexpectedly asymmetric, in that it is better to err on the side of too much structure, and that different environmental dynamism dimensions (i.e., velocity, complexity, ambiguity, and unpredictability) have unique effects on performance. Increasing unpredictability decreases optimal structure and narrows its range from a wide to a narrow set of effective strategies. The authors also find that a strategy of simple rules, which combines improvisation with low-to-moderately structured rules to execute a variety of opportunities, is viable in many environments but essential in some. This sharpens the boundary condition between the strategic logics of positioning and opportunity. And juxtaposing the structural challenges of adaptation for entrepreneurial vs. established organizations, the authors find that entrepreneurial organizations should quickly add structure in all environments, while established organizations are better off seeking predictable environments unless they can devote sufficient attention to managing a dissipative equilibrium of structure (i.e., edge of chaos) in unpredictable environments.This paper was awarded the 2015 ASQ Award for Scholarly Contribution.