Optimal Structure, Market Dynamism, and the Strategy of Simple Rules
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Davis_Optimal StructureASQ finalsubmission.PDF
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Author(s)
Davis, Jason
Eisenhardt, Kathleen M.
Bingham, Christopher B.
Date Issued
September 2009
Journal
Administrative Science Quarterly
Publisher
Cornell University
Citation
Davis, Jason, Kathleen M. Eisenhardt and Christopher B. Bingham "Optimal Structure, Market Dynamism, and the Strategy of Simple Rules." Administrative Science Quarterly, 54 (2009): 413–452
Version
Author's final manuscript
Abstract
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. We find that the structureperformance
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. We 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, we find that entrepreneurial organizations should
quickly add structure in all environments, while established organizations are better off seeking
stable environments unless they can devote sufficient attention to managing a dissipative
equilibrium of structure (i.e., edge of chaos) in unpredictable environments.
MIT Department
Sloan School of Management
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DOI of Published Version
http://www.atypon-link.com/JGSCU/doi/pdf/10.2189/asqu.2009.54.3.413
