Jason P. Davis

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. We 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. 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 predictable environments unless they can devote sufficient attention to managing a dissipative equilibrium of structure (i.e., edge of chaos) in unpredictable environments.

Rotating Leadership and Collaborative Innovation: Recombination Processes in Symbiotic Relationships

Using a multiple-case, inductive study of eight technology collaborations between ten organizations in the global computing and communications industries between 2001 and 2006 this paper examines why some interorganizational relationships produce technological innovations while others do not. Comparisons of more and less innovative collaborations show that high-performing collaborative innovation involves more than possessing the appropriate structural antecedents (e.g., R&D capabilities, social embeddedness) suggested by prior alliance studies. Rather, it also involves dynamic organizational processes associated with collaboration partners’ leadership roles that solve critical innovation problems related to recombination across boundaries. While dominating and consensus leadership processes are associated with less innovation, a rotating leadership process is associated with more innovation. It involves alternating decision control that accesses the complementary capabilities of both partner organizations, zig-zagging objectives that engender deep and broad technological search for potential innovations, and fluctuating network cascades that mobilize different participants who bring variable inputs to recombination. The paper also discusses recombination mechanisms in the organization of collaborative innovation, variations in the performance of dynamic interorganizational ties, and how organizations develop symbiotic relationships that overcome the tendency of long-lived relationships toward inertia.

The Group Dynamics of Interorganizational Relationships: Collaborating with Multiple Partners in Innovation Ecosystems

This paper examines how organizations collaborate with multiple partners, such as when they develop innovative and complex product platforms like smartphones, servers, and MRI machines that rely on technologies developed by organizations in three or more sectors. Research on multipartner alliances often treats them as a collection of independent dyads, neglecting the possibility of third-party influence and interference in dyads that can inhibit innovation. Using a multiple-case, inductive study of six groups, each composed of three organizations engaged in technology and product development in the computer industry, I examine the collaborative forms and processes that organizations use to innovate with multiple partners in groups. Groups that used the collaborative forms of independent parallel dyads or single unified triads generated mistrust and conflict that stemmed from expectations about third-party participation and overlapping roles and thus had low innovation performance and weaker ties. Other groups avoided these problems by using a dynamic collaboration process that I call “group cycling,” in which managers viewed their triad as a small group, decomposed innovative activities into a series of interlinked dyads between different pairs of partners, and managed third-party interests across time. By temporarily restricting participation to pairs, managers chose which ideas, technologies, and resources to incorporate from third parties into single dyads and ensured that the outputs of multiple dyads were combined into a broader innovative whole.

Economic Value Creation in Mobile Applications

New mobile development platforms are a 21st-century growth pole. By successfully recombining existing information technologies with new innovations, they have spurred a positive feedback loop of consumer adoption of mobile devices and firm entry into a wide variety of applications, or “apps.†Describing the industry calls for superlatives: after just a few years, it has the largest installed base of programmable devices in the history of computing and the largest group of app developers, mostly entrepreneurs, ever to enter a technology industry. Despite this size, the industry is still at an early stage, with rapid growth and a wide variety of economic experiments trying to resolve the uncertainty about how this new industry will create economic value. Because there are hundreds, and may someday be thousands, of app markets, the industry needs economic institutions to support market experimentation. However, as we document in this paper, the sheer volume and market diversity of app product entry has created problems for marketing and commercialization, most importantly the challenges of matching consumers to products. At this early stage in the industry life cycle, the existing market institutions have been overwhelmed. This early pattern is like many earlier information and communications technology industries in that the early stage shows a pattern of technical success but commercialization struggles. However, several important new issues arise, including a (possibly transitory) bias against entrepreneurial commercialization, and the importance of end-user demand in determining market evolution. We conclude by considering how this situation has impacted the industry’s task of discovering economic value and choosing among different app and platform features to make its ultimate contribution to economic growth. We also consider the likely market and institutional responses to the current bottleneck.

Knowledge Asymmetry and Brokerage: Linking Network Perception to Position in Structural Holes

Although brokers who span structural holes have been shown to occupy a valuable position in organizations, emerging research suggests that the returns to these brokers can vary depending on whether alters can credibly threaten to disintermediate the broker and close the structural hole. Yet, the factors that shape the likelihood of disintermediation have not been extensively explored. In this article, we build from the premise that an alter’s knowledge about the structural hole is a necessary condition for disintermediation. Without this knowledge, the alter will not know with whom to disintermediate. Drawing on research about cognitive social structures, we argue that individuals are most likely to be in a structural hole under the condition of knowledge asymmetry—that is, when brokers know about the structural hole, but alters do not—which reduces the likelihood of disintermediation by alters and increases the benefits for brokers. Using advice network data from a high-tech organization, we find evidence of knowledge asymmetry in existing structural holes, and moderation of this relationship by two factors also related to disintermediation: (1) broker’s reputation and (2) alter’s position as a provider (vs. acquirer) of resources. We also show that knowledge asymmetry is related to higher returns for brokers. The broader theoretical contribution is a better understanding of how network perceptions are related to positions across structural holes, an important structure from which power is derived in organizations and markets.

The Emergence and Coordination of Synchrony in Organizational Ecosystems

This paper explores the emergence and coordination of synchrony in networked groups like those that develop integrated product platforms in collaborative ecosystems. While synchronized actions are an important objective for many groups, interorganizational network theory has yet to explore synchrony in depth perhaps because it does not fit the typical diffusion models this research relies upon. By adding organizationally realistic features – sparse network structure and intentional coordination – to the firefly model from theoretical biology, I take some first steps in understanding synchrony in organizational groups. Like diffusion, synchrony is more effective in denser networks, but unlike diffusion clustering decelerates synchrony’s emergence. Coordination by a few group members accelerates group-wide synchrony, and benefits the coordinating organizations with a higher likelihood that it converges to the coordinating organization’s preferred rhythm. This likelihood of convergence to an organization’s preferred rhythm – what I term synchrony performance – increases in denser networks, but is not dependent on tie strength and clustering.

Organization Architecture and Dynamic Capabilities: Network Microfoundations of Competitive Advantages in Dynamic Markets

This paper contributes to dynamic capabilities research by investigating how features of organization architecture provide a basis for superior firm performance and sustainable competitive advantage in dynamic markets. Using a simple model of organization architecture composed of networked employees with distinctive knowledge and dynamic markets composed of a flow of heterogeneous opportunities, I explore how knowledge mobilization mechanisms leveraging network ties – transfer, collaboration, and recombination – underlie dynamic capabilities. Prior theory predicts that the performance of these substitute network mechanisms increases with market dynamism, but produces unsustainable advantages under imitative conditions. By contrast, I find different performance effects of unpredictability and complexity, and a complementary impact of using transfer and recombination mechanisms together that can generate sustainable advantages, suggesting design conditions for dynamic capabilities.

Network Isolates: Entrepreneurial Bootstrapping and the Social Disconnection of New Organizations in the Mobile App Ecosystem

Extensive prior literature has studied how young organizations are impacted by and often benefit from embeddedness in key industry networks. Indeed, some research advises that entrepreneurs “don’t go it alone” (Baum, Calabrese, and Silverman, 2000). This literature has also highlighted a dynamic whereby young organizations with higher quality are most likely to sort into these networks. Yet this perspective often fails to consider the drivers and prevalence of high-quality young organizations not becoming embedded, and instead remaining network isolates. Drawing on resource dependence and exchange theory’s emphasis on network ties arising from mutual and balanced interdependence, we explicate how organizational design decisions, current performance, and competitive pressures influence whether a young organization remains a network isolate. We test and find support for our arguments using an unusually rich, complete, and large “big data” dataset that captures all competitors in the mobile app ecosystem on the Apple iPhone ecosystem over a period of 5 years, showing that a substantial fraction of high-performing mobile app developers remain outside of the venture finance network.