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Demand Shock; Coordination; Adaptation; Organization Design; Interdependence; Dynamic Environments; Defense Industry
Aggarwal V. A., Wu X. B. (2015). Organizational Constraints to Adaptation: Intra-firm Asymmetry in the Locus of Coordination Organization Science, 26(1), pp. 218-238.
The authors assemble a panel data set of firms in the U.S. defense industry between 1996 and 2006 to examine the drivers of heterogeneous incumbent firm adaptation following the industry-wide demand shock of September 11, 2001.This shock entailed not only an increase in aggregate demand but, more importantly, a shift in the relative attractiveness of individual product areas, resulting in the need for firms to reshuffle their product portfolios in response to changing demand conditions. The exogenous nature of the shock allows the authors to empirically identify the effect of preshock interdependence structures on postshock adaptation outcomes.The authors find that the locus of coordination inside a firm can explain differential postshock adaptation performance: because interdependencies spanning organizational boundaries are more difficult to manage than those contained within such boundaries, coordination across product areas creates greater adaptation challenges compared with coordination within product areas.The authors further investigate the moderating effects of product complementarity and organizational grouping, finding results consistent with their hypothesized mechanisms. As one of the first studies to empirically link a firm’s locus of coordination with its adaptation performance, this study contributes to our understanding of the role of interdependence and organization design in dynamic environments.