Vikas A. Aggarwal

Organizational Constraints to Adaptation: Intrafirm Asymmetry in the Locus of Coordination

We 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 us to empirically identify the effect of preshock interdependence structures on postshock adaptation outcomes. We 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. We further investigate the moderating effects of product complementarity and organizational grouping, finding results consistent with our 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.

Adaptive Capacity to Technological Change: A Microfoundational Theory of the Dynamics of Routines

We take a microfoundational approach to understanding the origin of heterogeneity in firms’ capacity to adapt to technological change. We develop a computational model of individual-level learning in an organizational setting characterized by interdependence and ambiguity. The model leads to organizational outcomes with the canonical properties of routines: constancy, efficacy, and organizational memory. At the same time, the process generating these outcomes also produces heterogeneity in firms’ adaptive capacity to different types of technological change. An implication is that exploration policy in the formative period of routine development can influence a firm’s capacity to adapt to change in maturity. This points to a host of strategic trade-offs, not only between performance and adaptive capacity, but also between adaptive capacities to different forms of change.

Learning-By-Participating in Decision-Making: Broadening Participation, Narrowing Feedback

A central tenet of work in the Carnegie School tradition is the notion of “learning-by-doing”— organizations learn over time through feedback. In this paper we argue that the learning-by-doing account overlooks the fact that an organization’s decision-making structure is often participatory—i.e., organizational decisions often involve multiple individuals aggregating opinions through a process such as voting. In such contexts, individuals in the organization do not themselves learn-by-doing. Rather, when participating in the decision, they may vote for an alternative that is different from the one eventually selected by the organization. A key consequence of this is that these individual participants do not always receive feedback on their own choices; rather, they receive feedback on the choice made by the organization. We call this “learning-by-participating,” and we seek to understand the implications of this form of learning by comparing it to learning-by-doing, where an individual in the organization (such as the CEO) makes decisions on her own. Using a computational model of decision-making under uncertainty, we find that learning-by-participating leads to distinct patterns of individual learning that create trade-offs at the individual and organizational-levels. For example, while learning-by-participating is beneficial with respect to organization-level performance, it causes a minority of individuals within the organization to hold overly-optimistic views of low-payoff alternatives. We discuss the implications of our findings for research on learning and information aggregation.