Organizational Design, Information Transfer, and the Acquisition of Rent-Producing Resources

Authors:
Michael Lenox
Affiliations:
Stern School of Business, New York University, 40 West 4th St. Suite 717, New York, NY 10012, USA. mlenox@stern.nyu.edu
Venue:
Computational & Mathematical Organization Theory
Year:
2002

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Abstract

Within the resource-based view of the firm, a dynamic story has emerged in which the knowledge accumulated over the history of a firm and embedded in organizational routines and structures influences the firm's ability to recognize the value of new resources and capabilities. This paper explores the possibility of firms to select organizational designs that increase the likelihood that they will recognize and value rent-producing resources and capabilities. A computational model is developed to study the tension between an organization's desire to explore its environment for new capabilities and the organization's need to exploit existing capabilities. Support is provided for the proposition that integration, both externally and internally, is an important source of dynamic capability. The model provides greater insight into the tradeoffs between these two forms of integration and suggests when one form may be preferred over another. In particular, evidence is provided that in uncertain environments, the ability to explore possible alternatives is critical while in more certain environments, the ability to transfer information internally is paramount.