Organizations undertaking complex projects in uncertain environments

Jason Barr, Nobuyuki Hanaki

Research output: Contribution to journalArticlepeer-review

4 Scopus citations

Abstract

Recent evidence suggests that firms' environments are becoming more complex and uncertain. This paper investigates the relationship between the complexity of a firm's activities, environmental uncertainty and organizational structure. We assume agents are arranged hierarchically, but decisions can be made at different levels. We model a firm's activity set as a modified NK landscape. Via simulations, we find that centralized decision making generates a higher payoff in more complex and uncertain environments, and that a flatter structure is better for the organization with centralized decision making, provided the cost of information processing is low enough.

Original languageEnglish (US)
Pages (from-to)119-135
Number of pages17
JournalJournal of Economic Interaction and Coordination
Volume3
Issue number2
DOIs
StatePublished - Dec 2008

All Science Journal Classification (ASJC) codes

  • Business and International Management
  • Economics and Econometrics

Keywords

  • Decision making
  • Environmental complexity
  • Information processing
  • Organizational structure

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