Organizations On-the-go: Linking Welfare Effects to Strategy July 30, 2013 draft – 13,457 words Iva Petkova Columbia University, COI Working Paper Abstract In this study, I am interested in discovering alternatives to the Weberian type in which extant management practices are recombined in ways that lead to new goals. The analysis suggests that the emergence of collaborative community forms based around projects and inter-organizational networks facilitates recombinations in practice that are consequential to the success of new organizations in hypercompetitive domains. These non-commercial goals, related to knowledge sharing and learning are then proposed as part of a framework for linking welfare effects to strategy. Keywords: emergence, learning, networks, projects, teams. _____________________________________ INTRODUCTION The evolution of new organizations has attracted growing theoretical and empirical attention in the past two decades, but little research has studied the microsociological processes of the emergence of novelty in organizations with new goals, such as welfare effects connected to learning. The selection-adaptation debate is the main source of division in organization theory and developments here greatly affect how research approaches novelty scientifically (Cyert and March, 1963; Stinchcombe, 1965; Hannan and Freeman, 1977; Aldrich, 1979; Williamson, 1991; Nelson and Winter, 1982; Powell, 1990; Carroll et. al., 1990). 1 Researchers know from data that “profound changes are occurring in the postindustrial environment and that new organizational forms are emerging within it” (Heydebrand, 1989: 348; cf. Bell, 1976; Drucker, 1993; Piore and Sabel, 1984). However, until recently, conceptualizations of management intentionality were not the foci of analysis in most theories on evolution of form (see, Lewin and Volberda, 1999). The question asked by Heydebrand in 1989, “what is really new under the sun?” (1989: 333) remains to be investigated. The majority of studies undertaken in the past two decades have typically followed a line of reasoning in which the question of interest was tracking new forms, industries and organizations. Reported by Clegg and Hardy in their introduction of the Handbook of Organization Studies in 1996, debates on defining organizational novelty are fueled by three questions: “What are the different kinds of organizational forms?”, “How do these forms arise?”, and “How do these forms work?” In the absence of organizing paradigms that are sufficiently distinct, Weber’s bureaucratic organization contained in Chandler’s (1962) multidivisional enterprise is still is the prototype that fleshes out discussion on novelty as it embodies a real-world pattern of organizing that overpowered preceding forms. The problem in arriving at a framework that links the emergence of novelty with novel organizational goals is that the elements of novelty in contemporary organization should be distinct from theorizations of novelty offered in the past (e.g., Green, 1983; Cohen et. al., 1972). This means that Max Weber’s ideal type should be avoided for comparison. Hecksher (1994) has argued that Weber’s (1968) form itself is not an actual representation of organizational reality. It is but a “convincing demonstration” (1994: 27) that social organization develops in evolutionary stages. Davis and Marquis have seconded this proposition by arguing that the “social structures that matter will often be organizational structures” (2005: 334) and we know from earlier contributions "every evolutionary economic problem requires a social institution to solve it" (Shotter, 1981: 2). The integration of world capital markets (Useem, 1996) the emergence of the Internet as a channel for conducting business and for building brands represents an integrative macro change that can facilitate the emergence of novel organizations and novel goals and practice on meta level. 2 Empirical research on new organizations begins has tended in the past two decades to start with doing away with the Weberian type. Empirical submissions also tend to randomize on the theme of novelty and researchers prefer to choose individual examples of organizations as the new form of interest to be theorized (examples are ABB, GE, Seiko, British Airways, J&J, HP, or Toyota, among many others). Out of these examples organizational scholars have weaved a rich tapestry of labels to appeal to the diverse palates of academic and practitioner audiences. Examples are the boundaryless company (cf. Hischhorn & Gilmore, 1992; Ashkenas, Ulrich, Jick, & Kerr, 2002), virtual corporation (Davidow & Malone, 1992), network organization (Miles & Snow, 1995), chaotic form (Smith & Zeithaml, 1996), disaggregated design (Day & Wendler, 1998), and web (Hagel, 2002). The richness of the methodology in empirical accounts makes it difficult to find consistent characteristics of a new organization. An overwhelming 90% of all articles submitted between 1991 and 2001 in Administrative Science Quarterly, have followed an empirical turn as reported by David and Marquis in 2005. The submissions contributing to a theoretical line of inquiry were based on population ecology foundations. However, the empirical submissions were “broadly topical and […] theoretically eclectic” (2005: 334). Walsh et. al. (2006: 658) reported that “[N]etworks, learning, embeddedness, trust, knowledge, management and cognition” are the rhetorical concepts researchers use to make sense of organizations today. Some authors (Heckscher, 1994: 17) have noted that the examples are “(largely partial and shortlived) examples of organizations that seem deliberately to violate bureaucratic principles”. Illinitch et. al. (1996: 211) have also suggested that macro factors, such as intensifying competition and advances in information technology have forged a particularly strong belief in organization research that a “seemingly endless reorganization” in forms is happening. Another word of caution from Bartlett and Ghoshal (2002) is that that when global activities in large firms are legally consolidated and geographically dispersed on a global scale, it is difficult to get to the point of newness when it may obscure a variation on a theme. Empirical studies have shown that new organizations can use new practices that can still be associated with greater use of formalized rules and Weberian levels of centralization. A comparative study by Dunford et. al. in 2007 reported that organizational changes in the top 2,011 Australian firms related to proxies 3 such as adoption of broad new organizational practices indicated “lack of evidence for systemic transformation” (2007: 220). New organizations are, in short, distinct not only with regard to their structural characteristics, but also in their impact on the environment, their stakeholders and clients, and peer organizations to which their practice appeals. Emerging steps in the direction of linking organizational form with organizational innovation is done by Walsh et. al. who argue the need to study “competitive advantage by studying bureaucratic organization” (2006: 659). In 2012, Romanelli and Fiol suggest that theories of organization should look at the emergence of collective identity in new organizations. In 2011, Wry, Lounsbury and Glynn take the debate a step further by relating what they call “collective identity stories” to “growth stories”. In 2012, Volberda et. al. advance a meta-narrative attempting to investigate the relationship between the influence of environmental and institutional demands on organizational design and firm performance. This paper adds to the debate by studying the evolution of theorizing on new organizations and forms by contrasting the predictions of organizational scholars – then called futurologists between the 1970 and today. By comparing these submissions with recent empirical research on novelty, the paper advances a framework that a collection of practices that have surfaced in contemporary organizations. These practices, observed in project based organizations and interorganizational networks are associated with novel goals, such as welfare effects that extend to knowledge sharing and the pursuit of codification of tacit knowledge instead of the pursuit of immediate commercial goals. The paper argues that this inter-penetration of new practices indicates the evolution of new forms. WHAT IS NEW UNDER THE SUN?i Seminal submissions: Future Form “In the risky business of futuristics,” Achrol argued in 1997, “it is safest to start with what we already know” (ibid: 57). One of the first exercises in reimagining organizational novelty was offered by Toffler in 1970. He argued that “we are witnessing not the triumph, but the breakdown of bureaucracy” (1970: 113). Writing twenty-five years before James March (1995), Toffler distinguished novelty in the intended organizational design of a ‘disposable’ 4 organization. He suggested that bureaucracy is linked to the stage of socioeconomic development and that if we experience accelerating rates of organizational change, this means that the political economy in question is also changing. Toffler charges disposable organizations with the ability to “change their internal shape with frequency […] Vast organizational structures are taken apart, bolted together again in new forms, then rearranged again. Departments and divisions spring up overnight only to vanish in another and yet another reorganization” (1970: 116). This massive rate of turnover is sustained internally by the assemblage of problem-solving teams from different functional departments that can attend to problems and emergent tasks. Toffler argued that “teams do not necessarily replace permanent functional structures, but they change them beyond recognition, draining them both of people and power” (ibid: 121, emphasis added). Toffler’s framework is particularly stimulating, because if perched against Weber's bureaucracy, it suggests that new organizations may have low Weberian levels of centralization and formalization, but at the same time, Toffler dissuades the reader from believing that this way of organizing results in a state of organizational permanency. Toffler asserts that “the more rapidly the environment changes, the shorter the life span of organizational forms” (ibid: 122). To achieve permanency, in short, may not necessarily mean to achieve commercial success. This Tofflerian submission is later echoed by Karl Weick (1977) who suggests that if an orgaization exhibits ‘total flexibility’, the outcome may be chaos. Eight years after Toffler, there was a turn in the study of organizations, referenced by the collective attempt of strategy scholars to understand the role of knowledge within firms. In 1978, Selznick and Nonet proposed that the levels of formalization and centralization in new organizations would decline. They argued that “rule-boundedness” will be superseded by the avoidance of codified routine and that the purpose of a form can change from fixed to flexible. In 1995, Nonaka and Takeuchi indicated that it is necessary to study processes of learning in organizations because an increasing number of contemporary organizations are considered to be “knowledge creating” companies. 5 In 1980, Ouchi introduced a meso approach to organizational innovation by arguing that the incongruence of goals - or, the content of strategy - may become a serious problem for contemporary organizations. He argued that this problem of double agency can be overcome by achieving organic solidarity in organizations and erecting “clan” units. Clans would be located within bureaucracies or corporations and are characterized by the belief “that individual interest is best served by a complete immersion of each individual in the interests of the whole” (ibid: 136). Ouchi and Jaeger (1979) later found these forms in technologically advanced industries, where teamwork was common, technologies changed often, and individual performance was highly ambiguous. Ouchi grounded his observations in Japanese companies, but theorized that the practice can be transplanted and thrive in other contexts, such as US multinationals. Ouchi’s “Z”-forms introduced a new dimension in the study of organizations which deals with the production of what could best be described as "welfare" effects to organizations, such as learning. This presupposes that instead of the orientation of Chandlerian enterprises to commercial goals, new types of organizational units should be studied where the orientation is on learning. The location in the organization of new innovative teams in Ouchi’s (1980) analysis is not as important as their meso goal. Teams should have the capacity to promote organic identification with a collective. This hypothesis is later picked up by Kogut and Zander in 1996 who argue from an Ouchian vantage point in their research on knowledge transfer that knowledge should be “situated not only physically in locality, but also mentally in an identity” (1996: 502, my emphasis). The new Ouchian meso identity is an important cultural prerequisite for moderating the effect of turmoil resulting from ambiguous performance criteria in contemporary organization. Ouchi and Jaeger argued in 1979 that a unique characteristic of learning teams in organizations (both new and established) is that the performance of teams itself does not require evaluation, and in fact, cannot “withstand the scrutiny of contractual relations” that a Williamsonian perspective adheres to (1979: 214). In 2001, Afuah contributed to this seminal argument by demonstrating that organizations of the future are flexible learners that quickly build the competences that “match the type of change that they face” (2001: 1225). 6 Mintzberg (1983) classified five ideal organizational types. His ‘simple structure’ is characterized by explicit and fixed jurisdiction. Mintzberg’s “machine bureaucracy” is similar to Weber’s (1968) and, also, Burns and Stalker’s (1961) concepts. More interesting is the multidivisional form (MDF). It is explained as a “quasi-autonomous structure coupled together by a central administrative structure” (Mintzberg, 1983: 215). Mintzberg argued that the M-form often emerges not from decentralization of machine bureaucracy, but from centralization of independent organizations. This is why he predicted that increasing levels of centralization will be observed in large Chandlerian corporations, despite the quasi-independence that their internal units seem to enjoy. The overall result in this framework is complete fragmentation of the Mform. Mintzberg’s final form is a version of Toffler’s “adhocracy”. In adhocracy ‘regimes’ novelty arises from processes of re-combination of existing knowledge and skills. This requires the presence of “multidisciplinary teams, each formed around a specific project of innovation” (Mintzberg, 1983: 256). This theorization is closer to the “recombination” hypothesis that contemporary organization and economic sociology research links with the emergence of innovation (). Heydebrand (1989) argued that post-bureaucratic novelty is characterized by a movement away from formal rationality. Weber’s bureaucracy formally exhibits elements of rationality in that it has low levels of social rationalization and high levels of hierarchical division of labor. The advent of new technological systems has helped managers to “undermine older social and technical forms of control” (Heydebrand, 1989: 342). In 1985, Fligstein showed that it is difficult to measure internal levels of complexity in large organizations, because management is decentralized and power may reside with sales and marketing departments. Heydebrand (1989) has not found these internal fragmentation processes to be problematic. He indicates that loosely coupled profit centers in federated corporations may indicate the emergence of less bureaucratic forms of delayered organization. Heydebrand (1989) has also noted that the current multidivisional organization exhibits internal properties that are far more complex than the divisionalized form that Mintzberg (1983) described. However, he does not conceptualize the M-form as the final example of novelty in 7 organizations. Consequently, Heydebrand (1989) disagrees with Mintzberg’s (1983) predictions that prior to its fragmentation the M-form will exhibit high levels of centralization. He argues that contextual processes related to increasing technological capability in some contexts, such as electronics and aerospace, will cause decline in the ideal typical Weberian type by improving the social rationalization of management processes and, thereby, laying the foundations for a new organizational culture and practice. Heydebrand also proposes that managerial intentionality will matter greatly in the reengineering of the M-form. New forms that will follow will “amount to a shift in the mode of administration, if not production, rather than a monolithic continuation […] in Weber’s master trend of rationalization” (1989: 339, emphasis added). This hypothesis can be linked with Ouchi’s hypothesis for the possibility for organizations to learn from ambiguous performance criteria. Heydebrand also agrees with his predecessors that new forms would be decentralized, participative and fluid; and, their size will be small, or they may be “small subunits in larger organizations” (Heydebrand, 1989: 337). New Developments: Organizations as Collectors of Capability Most new organizational research builds on the received wisdom of these submissions (Table 1). [Table 1 – about here] 8 Table 1. Bureaucratic vs. post-bureaucratic forms – structural characteristics. Bureaucratic organization Purpose Centralization Formalization Decision-making and performance Unit size Form Hybrid forms Explicit, fixed. Vision dictated. Hierarchically subdivided. Concentrated power. Impermanent forms Mission-oriented, flexible. Vision emergent. Team organization, open communication, diffusion of authority, substantive rationality. Distributed power. Avoidance of rule-boundedness. Participative management logics. Codified, blueprints for action. Leaders set specific objectives. Systematic, routinized, assumption of stability. Clear role definitions. Efficiency oriented. Preference for large units. Simple; Machine bureaucracy (Mintzberg, 1983) Post-bureaucratic organization M-form mutations Participatory, problem-centered, assumption of shifting environment. Fuzzy role definitions. Adaptation. Impermanence. Structure independent of assets. Preference for small units. Organic (Burns and Stalker, 1961); Adhocracy (Mintzberg, 1983); Z-clans (Ouchi, 1980); Nform (Hedlund, 1994). Adhocracy (Toffler, 1970); Chaotic (Volberda, 1996); Ambidextrous (Tushman & O’Reilly, 1996). Source: Adapted from Nonaka and Selznik (1978) and Child and McGrath (2001). Research on new organizations and the literature on strategy have headed increasingly in the direction of explaining the production of new knowledge in organizations. This trend is an important departure from earlier explanations of “new organizational forms”. Empirical research proposes that patterns in the production of knowledge may be the explanans to the emergence of novelty in organizations. Learning is an important determinant in making use of new knowledge. Boisot and Child (1988) and Hedlund (1994) have argued that knowledge originates within small groups of learners or at the level of interorganizational domain of units, because at these levels “articulated knowledge becomes tacit” (Hedlund, 1994: 76-77). In conventional Weberian hierarchy, small groups of learners would be formally unsupported to contextualize tacit knowledge, because bureaucracies are fit to reap returns from systems of knowledge that are formalized. In the turbulent institutional environments of today, however, management needs “extensive, multidimensional collection of capabilities” (Volberda, 1996: 362) that mixes close-knit and even formalized intrafirm communication with tacit inter-firm relations. 9 In 1994, Hedlund developed the idea that novelty is related to new capabilities in firms. He hypothesized that firms capable of developing new competences would possess knowledge that differs from the one supported by the M-form. Hedlund predicted that these knowledge-intensive organizations (called N-form) would be managed in ways that allow to recombine the capabilities across teams, or by fostering a ”[…] multifunctional, multinational, multidivisional” (ibid: 84) organization. In 1996, Volberda developed the idea of the flexible form. He based in on “non-routine technology” and argued that it is suited for hypercompetitive domains. The knowledge capabilities of this form are supported by multifunctional teams and alliances. The capability of this “flex” form can frequently change and as team and alliances become more knowledgeable about a shift in demand, new products and functions are introduced. Both the N-form and the flex form can be likened to Toffler’s ‘disposable’ organization and they can mutate into a ‘chaotic’ form, which is the final form on Volberda’s (1996) continuum. Volberda’s chaotic form reminds us of Toffler’s (1970) adhocracy and is, indeed, a very unstable ”kaleidoscope of shifting coalitions, chaotic communication patterns, random combinations, and general information overload” (Hedlund, 1994: 85). The two examples of new blueprint forms make extensive use of projects, teams and alliances. Their structure is disembedded from formal assets. They are driven by assumptions, other than economic performance. Finally, their unit size is small (Table 1). Before I turn to the two main claimants that tend to exemplify the predictions for organizational novelty of post-bureaucratic organization, the next section will show examples of “hybrids” (Table 1). SHIFTING CONCEPTIONS OF GOVERNANCE IN LARGE FIRMS In 2007, Palmer, Benveniste and Dunford took a two-stage analysis of the organization literature between 1992 and 2005 and found that eight recurring practices are increasingly reported as an organizational change in established “forms”. These practices are “networks and alliances, outsourcing of non-core activities, disaggregation of business units, de-layering, reduced internal and external boundaries, flexible work groups, empowerment and short-term staffing” (2007: 1841). Two actions are commonly used to suggest a trend of change in the multidivisional form. These are arrangements within firms, such as delayering and the use of teams, and involvement in inter-firm transaction partnerships (cf. Nohria and Eccles, 1992; Powell, 1990). In the large 10 scope of single case-studies, downsizing, delayering and devolving within firms are reported interchangeably as a new phenomenon in corporate governance. In empirical cases where all three practices occur, researchers have proposed that the result is a new formii. Accounts of transformation in the M- form begin with suggesting that there is a growing experiment with delayering initiatives that has contributed to a decline in the size of large firms. Zenger and Hesterly have reported in 1997 that the distribution of employment by firm size in the US for companies from all sectors with more than 10,000 employees has decreased from 25.6% in 1963 to 19.3% in 1987. Delayering initiatives have consistently been explained as “externalization: disposing of internal units and contracting out functions formerly performed inhouse” (Scott, 2004: 11, own emphasis). More generally, management scholars have argued that the benefits of vertical integration have diminished to firms, because time horizons have shortened (Quinn, 1992). Design and cost pressures have exposed firms to risks associated with non-performing functions in case they choose to maintain these functions in-house. Slashing non-core functions has the advantage of producing more compact organizations. Quinn (1992) has suggested that when internal restructuring and outsourcing are combined, the result is the emergence of “intelligent enterprises”. These types of organizations can be likened to disposable companies that can play with their strategic and structural features on-the-go. Some authors suggest that various types of internal restructuring in large organizations that leads to decomposition of the prevalent form is a ‘”false”’ premise on which to proclaim novelty (Heckscher, 1994: 29). It is difficult to find statistics that identify the prevalence of downsizing and to link downsizing with creation and sharing of knowledge that leads to new organizational arrangements and internal learning. Delayering itself may symbolize “the crisis of an old and rigid form” (Castells, 2000: 179). Some authors link delayering exercises to novelty in the organizational form, because this move produces profit. Quinn (1992: 57) has argued that Sony and Matsushita were pressured to decommodify their competences and absorb film and distribution companies “to keep afloat margins and revenues”. Afuah (2001) has noted that when previously un-integrated firms do 11 integrate vertically into an emerging new technology, they will experience superior performanceiii. In most of the reported cases, the disaggregation related to reducing (or inflating) the size of large firms by acquisition and slashing down of functions is not explicitly related to more collective experiment. For example, anecdotal evidence has linked delayering initiatives, such as outsourcing, to labor arbitrage, because “without doubt, big layoffs often accompany big outsourcing deals” (Engardio, 2006). These opinions offer another layer of normativity in the debate on novelty. There has been a trend in the literature to argue that the net organizational result from outsourcing "non-critical" functions in companies, such as Nike or Reebok, is the emergence of ‘modular’ forms of organization. In these forms decision-making processes remain relatively centralized (Dess et. al., 1995; Lei, Hitt, and Bettis, 1996; Schilling and Steensma, 2001). Modular forms seem to offer a variation on the multidivisional firm. An excellent description of this normative approach is shown in Malnight (2001), who compares the evolution in the management practices of Lilly and Roche during a fifteen year period (1980-1994). Malnight (2001) suggests that increasing complexity in the two firms’ internal structures is joined by convergence in their processes. Pharmaceutical firms engage in the same core activities, such as discovery or regulatory approval, but present a special case of organizational arrangement, because the only processes that are decentralized are local operating authority and standards. This makes big pharma companies still loosely federated and highly centralized in core aspects of their value chainsiv. Even though cross-functional task forces are used to manage operations such as discovery, these ad-hoc units still use highly routinized process of discovery and decision-making. Examples from other industries are the international expansion of large accounting firms. These players follow their clients by “loose strategic alliance of quasi-autonomous firms” (Brown et. al., 1996: 65) in which operating control is decentralized and the use of rules and procedures is generally low. This federated structure had to be abandoned in the 1990s, when clients were prompted by regulations to require more general business advice. Brown et. al. (1996) calls the new configuration a “professional managerial hierarchy”. The “hierarchy” operates on the basis of joint decision-making by all previously quasi-independent national firms. The form also uses executive committees and cross-functional teams, but in these structures the use of formal rules and procedures is high and decision-making shifts from joint to directive. 12 The examples show that the reconstruction of control mechanisms in some large organizations or multinational federations is likely to result in preserving elements of the Weberian logic along which these contemporary organizations are organized. This argument has inspired some authors to offer more conservative gauge on innovation in organizations. Fulk and Desanctis (1995) argued that delayering amounts to a new form only when hierarchy yields to lateral linkages between teams that otherwise comprise the functional structures. With the onset of the Internet, these linkages are facilitated by advances in e-communications that obviate the need for physical proximity. Birkinshaw (2000) has noted that, specifically for large multinational firms, lateral organizing can lead to problems of double agency where the new lateral units convene with functional arrangements (also, see, Child and Rodrigues, 2003). Palmer, Benveniste and Dunford have asserted that the problem in large firms is that lateral arrangements have to be maintained “without the assistance of traditional bureaucratic hierarchies” (2007: 1834). Writing for Decision Sciences in 1997, Joyce et. al. further observe by using the accounts of 512 employees in 8 diverse organizations that lateral initiatives “improve communication, encourage consensus decision-making and require interdepartmental interaction prior to decisions" (ibid: 13). The results concur with Toffler (1970) that lateral initiatives do not remove functional hierarchies, but add non-hierarchical structures to them. The problem is that lateral managers across Joyce et. al.’s sample (e.g., senior unit, program, project or brand) could not "rely on their positional power" (ibid: 14) in the system and continued relying on the opinions of their functional counterparts. Dual reporting stress is, indeed, recounted by respondents. Another line of empirical research on learning is presented by Brynjolfsson et. al. in 1996. The authors show that continuous improvement processes and learning from previous mistakes, such as total quality management (TQM), “can be counterproductive” (1996: 4). At MacroMed – the medical production firm that the authors studied – the target design of cross-functional teams interfered with existing functional work-groups and tiered management practice. These problems show that when existing functional structure remains intact, there is a difficulty to produce new knowledge and learn from it in large and medium organizations. At the same 13 time, it is reported that the normative importance of adopting lateral mechanisms, such as cross functional teams by large firms are as significant to organization theory as “the shift that occurred among large corporations in the 1950s, 1960s and 1970s from functional governance structures to multidivisional structures” (Zenger and Hesterly, 1997: 216). There is a similar difficulty in reporting the relative propensity of large or medium organizations to adopt lateral governance mechanisms. Fulk and Desanctis have noted in 1995 that the trend to adopt lateral governance mechanisms is “gradual in most firms, dramatic in some, and nonexistent (or nearly so) in others” (1995: 338). The accounts that do suggest the trend for “lateralization” in large firms tend to build on non-academic references, such as Gordon’s (1992) survey in Training Magazine, Verespej’s (1990) article in Industry Week, and Mehta’s (1994) in Wall Street Journal. These accounts tend to suggest that teams are prevalent and relatively independent within the larger structure. Gordon’s (1992) study, for example, discovered that 82% of organizations with 100 or more employees reported that they had at least some employees working in a group identified as a team, further classified as permanent, temporary, and long-term cross-functional teams. An interesting conceptual contribution that attempts to resolve the problem of double agency is by Cross et. al. in 2000. They report that the transition from functional to a team-based structure in one bank necessitated that a third type of activity – “bringing up boundaries at the work unit level” (2000: 845) –be implemented jointly with instilling project logics into a functional enterprise. When the US National Cooperative Bank (NCB) transitioned to what authors describe as ‘team-like’ structure, it auctioned a variety of teams responsible for the development and selling of credit instruments, pulling down formalized control. As teams became independent from the functional structure boundary-spanning activities, such as cross-training team initiatives involving functional specialists became crucial for the success of the initiative. The research in this section suggests that despite observing some new exercises in large and medium firms that involve processes of delayering and renovation of organizational procedures and process, these initiatives alone cannot produce a novel organizational form because they do not necessarily lead to the accumulation of new knowledge or facilitate learning from it. The process of restructuring in large corporations (and smaller firms) requires that new governance 14 mechanisms involving greater openness to learning and accumulation of knowledge be adopted internally or in relations with others. We need to study novel practices, which Toffler (1970) and his like-minded Ouchi (1980) and Mintzberg (1983) consider apposite in increasing the “dialogue among various parts of the organization or create a system of collective experimentation” (see, Heckscher, 1994: 29). The next two sections offer avenues for conceptualizing such practices. RECOMBINING ORGANIZATIONAL PRACTICE AND WELFARE EFFECTS ORGANIZING AROUND COMMUNITY: PROJECTS A publication in Business Week in 2006 by Engardio and Einhorn argued that firms today should adopt initiatives related to the process of “transformational outsourcing”. This practice was considered to involve the shedding of layers of functional hierarchy, from finance, through human resource management, accounting, to research and development (R&D). Transformational outsourcing was strategically linked to commercial success –as opposed to welfare effects - and the authors quotes executives saying that "[T]his isn't about labor cost, the issue is that if you don't do it, you won't survive." (2006: 3). In the absence of more rigorous scholarly debate regarding what organizations outsource and how, evidence from Chiesa et. al. has surfaced in 2004 showing that outsourcing can be successfully managed if contracted to small firms organized around projects356790-. Chiesa et. al. called these firms knowledge intensive service firms, or KIS. They offer services from “initial concept definition, through design, engineering, prototyping, and laboratory testing, to final commercialization and marketing” (2004: 65). KIS firms are examples of project forms of organization (PFOs) (DeFillippi and Arthur 1998; Hobday, 2000; Whitley, 2006). Project-based forms are temporary systems embedded in more permanent organizational contexts and organized around the performance of a project (Sydow et. al., 2004). Hobday (2000) distinguishes between ‘project-led’ organizations, such as MNCs, which host projects as parts of their operations and ‘project-based’ organizations, which are firms structured around project logics of varying temporality. Project-based forms, or PBFs, are conceptualized as a new empirical phenomenon and in 1994 Hedlund dubbed them as ‘totally emergent entities’. Project forms are examples of Ouchian 15 forms. Projects move along ambiguous performance criteria, because they are built in mind with collaborative experimenting. However, the emergent empirical qualities of PBFs make it challenging to define how these organizations are novel. For example, in an editorial on the first special issue on project forms in Organization Studies, Sydow et. al. (2004: 1480) noted that “apparently projects come in many kinds and definitions are quite vague, pointing rather to an empirical level of interest that a clearly bounded theoretical subject area”. PBFs vary in the structures and processes they adopt and the technical uncertainty they tolerate. Whitley (2007) has suggested gauging the novelty of the project form by looking at the duration and uniqueness in a project. He points out a relationship between the duration of a project and the singularity of project outputs. In some industries such as film, entertainment, or new media, PBFs organize around goals that are highly singular and dissolve upon project completion. If project goals are singular, it is common that the project firm is found only for the duration of the project, for “organizational convenience” (DeFillippi and Arthur, 1998: 137). In temporary PBFs, the expectations to continue employment is slim (see, Almeida and Kogut, 2001). These firms consequently have a low aptitude for retaining project-specific knowledge in a lasting organization. A different gauge on novelty by Lindkvist in 2004 proposes to measure the extent to which the structure and process in projects are organized around project and not functional dimensions. The idea is that novelty is more likely to persist in organizations founded on multiple roles and identities. Examples here are Grabher’s observations of the Munich enterprise software industry in 2004. Roles and outputs in the software industry are not clearly defined and the boundaries between tasks can permeate the formal structure. Projects that are unique and dissolve with the completion of deliverables are similar to projects based on multiple roles and identities. The difference is that highly unique projects tend to begin and end as impermanent structures. They generate knowledge necessary for the completion of the project, but do not retain it at an organizational level. Recently, there has been some evidence that singular PBFs, such as boutique biotech firms, show perseverance toward a more permanent organizational structure. Whitley (2007) reports that as markets for drugs develop, small biotech firms continue playing important roles, “instead of 16 being swallowed up by established pharmaceutical companies” (Whitley, 2007; cf. Powell et. al., 1996), which tends to be the result when a project is hosted by an MNC. Based on the stability of project roles and singularity of project outputs Whitley (2007) advances a typology of four PBFs that score differently (high-low) on the two proxies. The craft PBF, in IT consulting or professional business firms, is characterized by simple goals and stable roles of participants that comprise them. This is also the form that is most likely to lead to the problem of double agency. Bresnen et. al. (2005) have studied the way management practices disperse in four ‘craft’ PBFs - two engineering firms, one oil company, and a large MNC division organizations. The authors find that the success of the project organizations depends on the preexisting internal structure of the organizations that engage with practicing the form. In two examples, attempts to decentralize work arrangements worked against established company culture and process and, despite the project logic that permeated the functional structure, a double agency problem surfaced between functional management and “managers on the sites” (2005: 34). In 2007, Whitley introduced the ‘precarious’ PBF. This project form is characterized by Ouchian and Tofflerian instability. Precarious PBFs involve risky and unusual outputs mixed with highly volatile roles and skills. In precarious PBFs the division of labor is unstable, the organizational procedures are informal and the problem of double agency is actually an expected result of this arrangement. Precarious PBFs exist in biotech, software and start-up firms. It is assumed that the development of a permanent structure in precarious PBFs will be low because the changeability of goals and the high degree of decentralization of 'precarious' teams can cause problems in the development and diffusion of organizational routines (see, Bresnen et. al., 2005). However, the instability in this project arrangement can contribute to learning and knowledge sharing. Whitley (2007) reports that some biotechnology firms based on precarious project logic are able to develop permanent structures and continue to operate on the principle of precariousness. Large MNCs and their divisions can also nest PFOs. However, functional units in MNCs tend to develop their own ‘thought worlds’ where there is little potential for overlap with project units. Sydow et. al. (2004: 1478) have argued that it “matters a lot if the project is embedded in functional or a business unit”, because depending on the configuration, project members will 17 either be let go or be re-absorbed back into the organization at the end of the project and the project will have limited options of retaining knowledge. Brady and Davies (2004: 1606) have argued that this problem can be resolved in cases where large firms experiment with projects that have potential for becoming key new lines of ‘repeatable’ business, “such as turnkey, outsourcing, design–build–operate, or public–private partnership (PPP)”. During “phase 3” of these projects, the larger firm “hosting” the smaller structure can attempt to consolidate learning by absorbing project cash-cows into the formal structure. The larger organization absorbs the project as a cash-cow on assumptions of future profit. The fact that the project form generates learning spillovers does indicate that large firms, as Ericsson, can learn and orgainize for welfare effects, as learning organizations. Network forms of organization are the final unit of analysis that can “host” PBOs. Although “the constitutive mechanism which turns projects into a network form of organization […] has not been elaborated until now” (Windeler and Sydow, 2001: 13), attempts have been made to provide a description of project networks. Windeler and Sydow (2001) have argued that deregulation and privatization of the German broadcasting market fostered a novel from of production organization in which content production was carried out collaboratively in project networks. A provider of a programming or a broadcaster triggers the process by stimulating a producer to form a project. The authors note that actors will enter the project as dyads (e.g., director-producer) and work with the rest of the group as a temporary project group. The difference between network organizations and large firms that host PBFs is that the despite their shared understanding for the limited project duration, network organizations can’ play’ with the timeline by re-selecting new members. Uzzi and Spiro (2005) note in their study of project networks around Broadway musicals that the degree of access of artists to diverse pools of creative material and talent increases in project networks where the connectivity and cohesiveness of ties across the network is high. Such situations occur in organizational settings where the formalization and centralization are low and where lateral coordination allows knowledge to be shared. 18 A final gauge on novelty in PBFs is to observe the degree to which actors in a project can ‘thrive’ on principles of impermanency. Large firms acquire cash-cows and routinize on project deliverables. When large firms open up their processes to PBFs, a project structure is necessary so a common understanding regarding the “’anatomy’ of the intended product” can arise (Engwall and Westling, 2004: 1563). In subsequent periods, the informal interaction of teams is no longer a key. The reason for the reversal to old culture is flexible arrangements must have limited duration to not affect the more stable hierarchical structure. This is why their goals have little tolerance for sustaining impermanent structures that may bring welfare effects. In contrast, PBFs can be successfully organized around principles of project impermanency even in situations where they tend to carry out repetitive projects. COLLABORATING AS A FORM OF ORGANIZING: NETWORKS As the transformation of the M-form continued, research platforms emerged to explain a different phenomenon – the formation of network forms of organization (NFO). In sociology, the argument originated in Powell (1990), who “imaginatively explored” (Perrow, 2001: 465) that in situations where exchange looks “more like a marriage than a one-night stand, but there is no marriage license” (1990: 301), a more socialized exchange emerges. Powell’s (1990) argument suggests that a defining feature of network forms is their saturation with organic solidarity of the Ouchian Z-type. Networks of individuals engage in “reciprocal, preferential and mutually supportive actions” (ibid: 301). Individual units exist only in relation to other units; and a “go-italong” approach is preferred. The Japanese connection is not coincidental; sociological interest in the network form was spurred initially by scholars interested in the prevalence of NFOs in Japanese firms (see, Dyer and Nobeoka, 2000). Lieberman and Asaba (1997) found how the diffusion of lean production techniques in Japan was associated with greater labor productivity for both automakers and their suppliers, while in the US the corresponding processes were stagnant, until Japanese automakers established facilities there in the 1980 and began transplanting processes and techniques. Using Silicon Valley as an example, Bahrami (1992: 44) has suggested that this success is achieved when firms realize that the links between organizations are important in transferring novelty and 19 this requires breaking down “the solid walls which have historically separated the firm from its external stakeholders”. Network forms of organization (NFOs) are formally defined by Podolny and Page (1998: 59) as governance mechanisms (equity and non-equity) in which “any collection of actors (N > 2) pursue repeated, enduring exchange relations with one another and, at the same time, lack a legitimate organizational authority to arbitrate and resolve disputes that may arise during the exchange”. The organizations associated with this definition are “joint ventures, strategic alliances, business groups, franchises, research consortia, relational contracts, and outsourcing agreements” (ibid: 59). Sociological scholarship usually places network forms of organization outside a Williamsonian continuum (Powell et. al., 1996), while strategic management studies tend to look at NFOs as strategically driven “intermediate organizational forms between markets and hierarchies” (Anand and Khanna, 2000: 295). Powell (1990) tangentially relates the emergence of network forms to the transformation of the M-form. He notes that international joint ventures, large firm-small firm linkages, and subcontracting arrangements are used by large firms after these become vertically disaggregated. Writing in 2001 for DiMaggio’s The 21st Century Firm, Powell cautions that a comprehensive restructuring for large firms is costly and therefore a reformed model based on “remnants of existing practices and partial set of new arrangements” (2001: 39) may be the result when searching for new organizations. Research on network forms of organization has grown exponentially since the 1990s, although Fligstein’s caution still holds that we know little of how “prevalent and paradigm-breaking network forms of organization really are” (2000: 663). At the same time, organizational sociology accounts link NFOs with superior advantages for the embedded firms. Factors, such as “spirit of goodwill” (Dore, 1983); “norm of reciprocity” (Powell, 1990); and “embedded ties” (Uzzi, 1997) are thought to flow via the network and empower the actors to perform. These welfare effects for the participants are explicitly conceptualized in the network perspective and these exist before or contemporaneously as inter-organizational networks are formed. 20 The factors that help connected firms perform successfully are concepts such as weak and strong ties, multiple pathways, few structural holes, high centrality, wide geographical scope, and experience in managing alliances (Westney, 1993; Dyer and Nobeoka, 2000; Powell et. al., 1996; Anand and Khanna, 2000). These positive effects also produce ‘inimitable value-generating resources’ for participating firms (Gulati, Nohria and Zaheer, 2000). The resources are frequently gauged by the higher profitability of firms that are internal to the network and the lower profitability for firms that are external. Podolny and Page (1998) dubbed the phenomenon ‘liability of unconnectedness’. Since the mid-1990s, some authors have argued that networks “have risen to prominence due to industrial restructuring” (Achrol, 1997: 57) of the M-form. This submission echoes Heydebrand’s (1989) own hypothesis that novelty flows from the stage of economic development. Scholarly submissions have noted that increasingly, “what goes on between firms shapes what goes on within them” (Carruthers and Uzzi, 2000: 486, own emphasis). Carruthers and Uzzi (2000) indicate that the emergence of inter-organizational networks produces changes in the cultural identities of conventional actors associated with production, distribution and consumption. This is another example where collaborative activity facilitates the emergence of welfare outcomes. Some submissions also argue that the result from breaking the multinational enterprise is leaner, flexible firms that lace into a network of strategic alliances and partnerships with suppliers, distributors, and competitors to sustain competitive edge. Cravens et. al. say that this is a ‘network formation process’ with three stages: “vertical disaggregation (Miles and Snow, 1986), internal redesign (Quinn, 1992), and the formation of alliances (Achrol, 1991)” (1996: 207). Another rendition of the argument is by Hirschorn and Gilmore who say that inter-organizational networks are replacing “vertical hierarchies with horizontal networks; linking together traditional functions through interfunctional teams; and forming strategic alliances with suppliers, customers, and even competitors” (1992: 157). Similarly to the contentions of the literature on project forms, network proponents assert that the multidivisional firm “is likely to be the dinosaur of the 21st century. Replacing it, are smaller, more focused, vertically disaggregated firms (Achrol, 1997), which are ‘networked’. One form 21 that is hypothesized to grow out from fragmentations is the small-firm network. The small firm itself is not a new arrangement, but the literature on the phenomenon suggests that small firms organize around new cultural logic. Perrow has noted in 2001 that the small-firm network (SFN) phenomenon exists in “clothing, food, light machinery, metal working, electronics and small- to medium-sized electronic goods […] But it is not clear from the literature that in all cases networks of small firms are involved, though networks exist in most” (2001: 456). Walsh et. al. corroborate to the argument in 2006 by noting that the modal firm in the US is a small business with fewer than 5 people and that this situation has not changed in the past 50 or 100 years. Ninety-nine percent of the nearly 25 million small firms that operated in the US in 2004 exhibited tendency grow fast in terms of knowledge generation. Small firms created around 70% of new jobs annually and produced 13 to 14 times as many patents and tended to go global before growing up (US Small Business Administration, 2006). There is, however, no systematic data suggesting that small five person firms themselves are networked. The challenge to study small firm networks is also a methodological one. Traditionally, small firms are comparable to large by looking at their supply chains and their relations with contractors by outsourcing, in the sense traditional large firms do. This is problematic, as small forms do not have supply chains and they do not outsource at least in the conventional sense[4]. Perhaps due to these methodological issues, there is not much evidence corroborating that there is an increasing rate of adoption of NFOs by small firms across diverse populations and increased downsizing at the MNC level (Perrow, 2001; cf. Saxenian, 1991; Uzzi, 1997). Organizational sociology, researchers, however, predict that with the breakage of the M-form “the future belongs to quick, constantly learning small firms” (Fligstein, 2000: 224) who must enable a set of alliances and networks with large counterparts to maintain fitness (Powell, 2001; Stuart, 1998; Stuart, Hoang, and Hybels, 1999). The argument for linking learning and welfare value of collaborative inter-organizational relationships persists here as well. The term 'welfare effects' is coined by Anand and Khanna who have asserted that “learning to manage is important” (2000: 298). Network sages, as Podolny and Page (1998) have corroborated to this 22 assumption. They argue that NFOs create value in two ways: either by promoting the rapid transfer of knowledge between firms or by encouraging novel syntheses of information produced by two nodes that share a long-term exchange relation (Powell, Koput and Smith-Doerr, 1996). This way of looking at the success of inter-organizational relations indicates that the expected results from collaborative actions are learning and knowledge. Exploring Welfare Effects in Collaborative Organizations Other variants of the interorganizational network are joint ventures and strategic alliances. Joint ventures are a well-known equity mode which “most closely replicates the hierarchical control features of organizations” (Gulati, 1998: 300; cf. Andrews, 1971; Pfeffer and Nowak, 1976). Strategic alliances are loosely coupled governance modes; they do not share equity and have few hierarchical controls (Hagedoorn, 1995). The need to learn in rapidly changing consumer markets is, once again, the main factor bringing firms together in loosely coupled network variants. Research here shows that it is more productive to study how the goals of collaboration here differ from those traditionally associated with bureaucratic collaboration. This obviates the need to study forms and brings forth the dormant discussion on relating new organizations to new outcomes, such as learning. The variants here are made up by either large firms that perforate emerging horizontal networks of smaller supplier firms (e.g., franchising models, such as Benetton’s, or subcontracting models, such as Toyota’s); or linkages between mid-size and/or large partners that come together for a particular purpose, such as “reducing the gap between conception and execution” (Perrow, 2001: 459, own emphasis). Castells (1996) has argued that franchising or subcontracting modes are hybrid-like in form and bureaucratic in purpose. However, some new practices of longer contracts and mutual problem-solving, especially in the auto-industry, have made the large firmsmall subcontractor model attractive in terms of welfare effects to firms (Helper, 1993; Dyer, 1996). Gulati (1998) has argued that regardless of the equity involved initially in setting up a network form of governance, firms will develop trust through prior ventures and “progressively use less hierarchical structures in organizing new alliances” (ibid: 303). Thus, there will be a progression from more hierarchical (joint ventures) to less hierarchical (alliances) variants in firm cooperation. 23 In the majority of cases, alliances are established for tangible reasons and, similarly to project forms, are of a particular temporal span[5]. The MIPS group is one example. It was established to promote the RISC technology (Reduced Transaction Set Computing Technology) between a number of large firms nd for a particular span of time. Gomes-Casseres (1994) argues that the alliance failed due to problems with conceptualization of technology. Indeed, the firms that sponsored the emergence of the aliance were prominent high-technology organizations (NEC, Sony, DEC, Daewoo, AT&T, and Silicon Graphics) and issues with the translation of technology among them may have contributed to the dissolution of the alliance mode. The network was organized via a strategic collaborative agreement, to which all network members were party, but had no joint organization that oversaw the alliance management. Problems arising from precisely the lateral configuration of the alliance mode may have had to do with the buyout of the firm in 1992 by Silicon Graphics. Despite issues with alliance modality, dissolution of the alliance did not mean death of the new organization (i.e., RISC). The buy-out was very similar to the way Ericsson absorbed its project and suggests that both NFOs and PFOs can produce learning effects because a new organizational culture of experimentation appears to permeate these arrangements. It has been challenging to pin down how knowledge and learning transpire in alliances because, as suggested by Gulati, Nohria and Zaheer, what flows through inter-firm ties is “private and invisible” (2000: 12). Attempts to reveal what is going on inside ties tend to obscure these elusive processes sometimes, by developing quantitative measures that may be tangential to the actual mechanisms via which knowledge flows. Anand and Khanna (2000), for example, have argued that value creation in alliances is gauged by the dollar performance of unanticipated excess returns by the parties in the period following alliance formation. ‘Value creation’ is the firm’s 'experience' in managing alliances and the unobserved heterogeneity between firms on this proxy. However, alliance experience is operationalized not as a process of continual knowledge sharing but as 'number of alliances'. Anand and Khanna find correlation between number of alliances and excess returns, as it is logical to expect that in some transactional arrangements involving equity, additional returns are reaped at the time of the alliance formation. The authors conclude that theirs “is one of the first studies to establish systematic evidence for the existence of learning effects in the 24 management of alliances” (ibid: 313). Their conclusions are laudable but the authors do not discuss explicitly the processes by which learning occurs. Powell et. al. have looked at other proxies in 1996. They argue that in biotechnology even simple licensing governance modes, used to transfer existing technologies and considered to be ‘weakly strategic’ (Nohria and Garcia-Pont, 1991), can produce profit because of “prior contact between the two parties to explore the viability of the project” (Powell et. al., 1996: 124). These prior social ties are an important predictor of future alliance ties, and, in themselves represent instances of learning. Uzzi (1997) has similarly argued that a degree of embeddedness of network actors in ongoing social arrangements is required for small firms to learn. Learning is therefore a key issue of interest in network studies. If licensing can be associated with learning, then the nature of collaboration in networks should differ substantially from the bureaucratic logic of enterprise. Powell et. al. (1996) explain that by controlling for prior levels of connectedness, learning happens when the measure of centrality increases for an actor and as the future portfolio of ties of focal firms becomes more diverse. This is another methodological point of advance in the literature on networks, but it can be weakened by an argument made by Podolny and Page in 1998. They argue that network methodology should clarify how firms learn by collaboration. Otherwise, transaction costs enthusiasts can explain the positive effects of networks by good management of resource dependencies that enhances the legitimacy of firms. One of the process-oriented qualitative studies that traced the knowledge processes by explaining the necessity for the emergence of welfare effects is Dyer and Nobeoka's well-known study of Toyota (2000). Their analysis indicates that because Toyota’s suppliers “do learn more quickly after participating in Toyota’s knowledge-sharing network” (2000: 345), the firm has created an organizational identity of the organic type. This is possible because the firm has maintained a set of coordinating rules that foster collective routines by which tacit knowledge is shared. Toyota uses three organizational vehicles that facilitate knowledge transfer. The supplier association is a network-level forum that functions through topic committees that facilitate knowledge sharing on topics that are highly consequential to commercial and non-commercial aspects of performance. The topics (e.g., ‘eliminating supplier design defects’) cultivate the building of a common identity among members. Problem solving teams are the second vehicle. They solve emergent 25 problems in supplier organizations that are also tacit (e.g., problems that have to do with the know-how of the organization). Finally, voluntary learning teams are put together in flexible 3year arrangements. These organizational arrangements imply The existence of some form of collective solidarity between the participants who “‘identify’ with a larger collective” (ibid: 503). This final exmaple shows the rich conceptual implications from following a microsociologcal perspective on the process of learning and knowedge sharing as prerequisites for gaining welfare effects. CAN EXISTING THEORIES OF ORGANIZATION EXPLAIN (OR PREDICT) NEW FORMS, AND SHOULD THEY? Heydebrand (1989: 323) has said that organization theory focuses on “how capitalism administers existing structures, whereas the relevant problem is how it creates and destroys them”. The interpretation of some authors is that this focus on the administration of advantages leaves theory unaccustomed to discovering historical alternatives to Weberian bureaucracy (Ilinitch et. al., 1998). We can see from the inductive agendas reviewed here that intentionality is important in the design of lateral organizations and that the goal of intentionality is to seek out and achieve new types of welfare effects. The level of analysis is an important issue to be addressed in new organizational frameworks. In most of received theory the “new form of interest” (Lewin and Volberda, 1999: 519), is the firm, population, industry, or audience level of analysis. Examples in this debate are population ecology, transaction costs theory (Williamson, 1975, 1991), behavioral theory (Cyert and March, 1963), contingency theory (Burns and Stalker, 1961), evolutionary theory of the firm (Nelson and Winter, 1982), resource perspective and the dynamic capabilities perspective (Kogut and Zander, 1992; Teece et. al., 1997). The dynamic capabilities perspective is one of few theories that under the “simplifying assumption that resources and capabilities can be modeled at the firm level” (Birkinshaw, 2000: 10). The organizational transformations discussed in this paper support a level of analysis that is both supra-firm and at the level of teams, or sub-firm. This analytical framework merges the macro analysis of organizations with meso approach to the process by which welfare effects, such as learning, facilitate commercial and non-commercial growth. 26 An example from one received theory to use this approach can be exemplified by the conceptual evolution in population ecology. In 1986, Hannan and Freeman proposed that focusing on two types of processes between populations of firms (blending and segregating) may be the key to distinguish forms within populations. In this framework, two processes warrant analytic acclaim. Segregating processes are activities related to institutionalization or codification of forms, in which an actor becomes institutionalized in order to have special standing in making claims. Blending processes reflect the struggle to make sense of the contextual upheavals of the 1980s Blending processes occur during times of “deinstitutionalization, perestroika, or reorganization” (Heydebrand, 1989: 332). They are connected to “conscious revision of forms and routines” (Hannan and Freeman, 1986: 63, own emphasis). They are unintended change processes carried out by management in order to take advantage of contextual opportunities, or to avoid deficiencies in past organizational designs. With this particular hypothesis, the founders of population ecology have indicated that organizations can emerge by trial-and-error along with developments in the institutional fields in which they are embedded. This submission has the potential to greatly affect the design of a supra theory on new forms. After 2000, form is defined as the meaning imparted for actors in a domain and distinction among forms is dependent on the degree of their institutionalization (Hannan, Polos and Carrol, 2002; Hannan, 2005; Hsu and Hannan, 2005). Forms “do not exist independent of external agents” (McKendrik et. al., 2003: 6). These assumptions leave out particularly emerging new organizations that may not have a contemporary audience to grant them identity. McKendrik et. al. (2003) is a case in point. The authors argue that disk-array producers in Silicon Valley were a new organizational form in an established industry. According to the authors’ definition of this industry, however, disk-array firms were themselves in the business of blurring perceptions of outsiders by integrating identities from other activities, making it difficult for audiences or researchers to “grant” them a rule-like standing. In this example, the meaning of form to various stakeholders could be investigated by a qualitative microsociological approach that emerges from the conscious efforts of disk producers’ managing teams to establish a community of like-minded peers. We do know that typical organizations in the Valley are tightly knit into inter-organizational networks and introducing themselves as a new form may have been 27 achieved by intentionality and push of those business practices that the community of peers considers successful to the narrative of “growth” pursued by the disk producers. Toward a Collection of Practice? Population ecology proponents have argued importantly that “firms routinely change their architectures without changing their identities” (Carroll and Hannan, 2001: 64). Papers here suggest elements of a contrasting narrative. Some new approaches have been developed in the direction of building theory from rigorous investigation of organizational practice. Hinings and Greenwood argued (1996) that organizations shape and respond to their socio-cultural contexts. Child and McGrath (2001) and Davis and Marquis (2005) have imputed that the relationship between new organizational forms and their contexts can facilitate the emergence of newness in organizations. Lewin and Volberda (1999) have noted that this relationship is based on the assumption that both Weber’s (1968) bureaucratic form and Chandler’s (1962) M-form coevolved with contextual upheavals of the industrial age and their contemporaries Nonet and Selznik (1978: 21) noted that forms arise “out of the character of the social system under construction”. Lewin and Volberda (1999) have suggested that change in organizational forms occurs at the gap between managerial intent and context and this “need not be an outcome of either managerial adaptation or environmental selection” (ibid: 526). As shown, strategic alliances and PFOs are new collaborative forms. These organizational arrangements evolve as C-level executives shape new practices and firm culture on-the-go by looking at the institutional environments in which their organizations are embedded (see, Koza and Lewin, 1998). Another proposal comes from Dijksterhuis et. al. (1999) who suggest that management logics (sets of context-specific macrolevel beliefs that strongly influence what managers do) should be an independent intervening variable in the co-evolution process between form and context. Dijksterhuis et. al. (1999) consider even downsizing initiatives to be a new organizational form, if these policies are communicated to staff by new narratives. The studies that use the “co-evolutionary” approach reinstate Weick’s (1977) submission that organizational members socially enact their environment. They facilitate the adoption of a microsociological approach to study the mechanism of knowledge creation and the content of 28 novelty. The co-evolutionary studies however tend to focus on the procedural aspects of coevolution between populations and their environments (cf. Koza and Lewin, 1998; Galunic and Eisenhardt, 1996). Few studies adopt a microsociological approach to look at the mechanism of evolution of content and strategy. DISCUSSION AND FUTURE RESEARCH To study the content of post-bureaucratic novelty in organizations is a crucial component that fills the gap between managerial creation of practice and academic design of theory. As with any research that wishes to extend existing paradigms of organizational knowledge to components of novelty in organizations, research on new forms has attempted to conceive of an ideal-typical conglomerate of features. Careful observation of emerging structural features is necessary. As cautioned in the beginning, however, research should be cautious of recording extreme diversity. As noted by Hecksher in 1994, an ideal-typical post-bureaucratic organization as of yet, “doesn't exist” (Hecksher, 1994: 17). It is useful to rephrase a word of caution from population ecology that too many forms can be precarious to any one’s propensity to survive and that the continual introduction of new organizational forms in a domain can produce feeble offspring (Romanelli, 1991). Numerous processes have been observed by research that suggests studying the goals of new types of organizing as an important component in theorizing about non-commercial aspects of innovation and growth in organizations. The obvious first requirement for novelty is that new organizational forms should be positioned outside the Weberian and Williamsonian continuum. New innovative organizations should be associated with organizational culture, or ways of doing things, that are different from those observed in bureaucratic organization. The new culture should impart a collaborative logic in the pursuit of welfare effects with peers. At the same time, future research need not exclusively rely on typical Weberian assumptions regarding how high or low the degree of “formalization” or “centralization” is in order to observe novelty in an organizational culture. Pure-type PFOs are sometimes associated with relatively high degrees of formalization. Pure PBFs tend to formalize knowledge acquired during the execution of their various projects in order to build an enduring set of competencies. 29 Although PBFs maintain basic project structure, the fact that they codify knowledge into routines involving high degree of formalization of procedures shows that the project form may be ostensibly related to a bureaucracy. However, we should not hypothesize that power should not be used at all in new organizations, just because “the shift away from bureaucracy involves a transformation in the use of power” (Hecksher, 1994: 53). Second, as they transform, existing (and predominantly large) organizations should show growth in their cultural competence. Nonet and Selznik have noted that rather than growth in size, new type of organizational growth should consist of and reveal “new unities with larger competencies” (1978: 23). As Dijksterhuis et. al. predict in 1999, lateral disintegration can be related to organizational novelty, if the addition of a lateral unit or the superimposition of an interdivisional unit produces novel organizational linkages between peers and solves existing problems, such as the double agency problem. When lateral restructuring is coupled with the reconfiguration of internal management process toward achieving new cultural goals (e.g., welfare effects in learning), the result is an organizational meso unity that enhances the existing competences on a macro, or community level. Third, when conceptualizing novel sources of organizational growth, it is necessary to do away with the assumption that commercial performance results in the most “adaptive” form. The goal of growing may be precarious, if we take Volberda’s (1996) and Toffler’s (1990) assumptions of instability that suggest the possibility of vitality in the adhocracy and the chaotic form. In dynamic organizational environments and with the advent of the Internet, organizations would be less likely to fail due to inherently faulty design. Their form, however, may be impermanent because of their heavy investment in experimentation with achieving welfare effects that lead to growth. Fourth, novelty in organizations should be associated with practices that can be empirically attested and meaningfully identified by members of a community of similar organizations. The organizations that carry these practices may share resource space, but the space that interests us when we study teams or community of peers is the ability of peer organizations to co-construct new space by learning and sharing knowledge acquired by testing new technologies or business 30 practice. An example of this interorganizational arrangement has surfaced in Internet communities of practice (Tripsas, 2009). Lastly, a related set of concerns for future research is to identify the exact processes by which the multidivisional firm is mutating. While large firms experiment with lateral practice, they are likely to co-find new projects along old organizational routines and structures (see, Stark, 1989). This is well observed in the cases where project forms are used by large firms to gain knowledge about complex and potentially repetitive transactions and are absorbed back into the formal structure. 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