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The Ambivalent Effect of Complexity on Firm Performance: A Study of the Global Service Provider Industry

Published on Feb 1, 2018in Long Range Planning 3.36
· DOI :10.1016/j.lrp.2018.02.002
Marcus Møller Larsen9
Estimated H-index: 9
(CBS: Copenhagen Business School),
Stephan Manning19
Estimated H-index: 19
(University of Massachusetts Boston),
Torben Pedersen45
Estimated H-index: 45
(Bocconi University)
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Abstract
Abstract Prior literature is ambivalent about whether organizational complexity has positive or negative effects on firm performance. Using rich data on global service providers, we explore this ambivalence by disentangling performance consequences of different types of organizational complexity. We show that complexity arising from the coordination of different services and operations negatively influences profit margins through increased coordination costs, whereas complexity coming from the sophistication of particular services may positively influence margins through informational advantages. We also investigate the moderating effects of process commoditization and client-specific investments. Our findings point to critical performance dilemmas facing global service providers in a highly competitive industry, and they help better differentiate performance effects of complexity at different organizational levels.
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References73
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Published on Feb 5, 2018
Stephan Manning19
Estimated H-index: 19
(University of Massachusetts Boston),
Marcus Møller Larsen9
Estimated H-index: 9
(CBS: Copenhagen Business School),
Chacko George Kannothra3
Estimated H-index: 3
(University of Massachusetts Boston)
We review key drivers, trends and consequences of global sourcing of business processes – the sourcing of administrative and more knowledge-intensive processes from globally dispersed locations. We argue that global sourcing, which is also associated with ‘offshoring’ and ‘offshore outsourcing’, has co-evolved over the past three decades with the advancement of information and communication technology (ICT), a growing pool of low-cost, yet often qualified labor and expertise in developing countr...
Published on Dec 1, 2017in Long Range Planning 3.36
Marcus Møller Larsen9
Estimated H-index: 9
(CBS: Copenhagen Business School),
Jacob Lyngsie6
Estimated H-index: 6
(CBS: Copenhagen Business School)
We investigate the connection between contract duration, relational mechanisms, and premature relationship termination. Based on an analysis of a large sample of exchange relationships in the global service-provider industry, we argue that investments in either longer contract duration or more intense relational mechanisms provide an effective means for contingency adaptation and therefore reduce the probability of premature termination. However, in situations where relationships are already gov...
Published on Sep 1, 2015in Journal of International Business Studies 7.72
Stephan Manning19
Estimated H-index: 19
(University of Massachusetts Boston),
Marcus Møller Larsen9
Estimated H-index: 9
(CBS: Copenhagen Business School),
Pratyush Bharati13
Estimated H-index: 13
(University of Massachusetts Boston)
Global delivery models (GDMs) are transforming the global IT and business process outsourcing industry. GDMs are a new form of client-specific investment promoting service integration with clients by combining client proximity with time-zone spread for 24/7 service operations. We investigate antecedents and contingencies of setting up GDM structures. Based on comprehensive data we show that providers are likely to establish GDM location configurations when clients value access to globally distri...
Published on Apr 1, 2015in Academy of Management Review 10.63
Daniel Albert8
Estimated H-index: 8
(UPenn: University of Pennsylvania),
Markus Kreutzer6
Estimated H-index: 6
(HSG: University of St. Gallen),
Christoph Lechner15
Estimated H-index: 15
(HSG: University of St. Gallen)
We examine an intriguing paradox regarding whether interdependencies in an organization's activity system enable or hinder strategic renewal—the incremental process through which an organization continuously adapts to the environment and explores opportunities to invoke change in its activity choices and outputs. One research stream, the “inertial view,” argues that the pervasiveness of interdependencies among activities increases inertia, which inhibits strategic renewal. Another research strea...
Published on Nov 19, 2014in Academy of Management Review 10.63
Thorvald Haerem9
Estimated H-index: 9
(BI Norwegian Business School),
Brian T. Pentland28
Estimated H-index: 28
(MSU: Michigan State University),
Kent D. Miller27
Estimated H-index: 27
(MSU: Michigan State University)
We reexamine the assumptions of current theory to update and extend the concept of task complexity to tasks that include multiple actors at any level of analysis. Tasks can be modeled as networks of required actions and information cues carried out or processed by particular actors. Counting pathways in the task network provides an index of task complexity that incorporates insights from organization research but is more consistent with contemporary complexity science than prior approaches and b...
Published on Aug 1, 2014in Global Strategy Journal 2.73
Stefano Elia9
Estimated H-index: 9
(University of Reading),
Federico Caniato24
Estimated H-index: 24
(Polytechnic University of Milan)
+ 1 AuthorsLucia Piscitello17
Estimated H-index: 17
(Polytechnic University of Milan)
This article deals with the performance implications of the governance mode (captive offshoring versus outsourcing) selected when companies offshore service activities, which is still quite controversial in the literature. After accounting for endogeneity issues, we investigate the relationship between governance and performances (both in terms of cost saving and service quality) on a sample of 132 initiatives from the 2009 Offshoring Research Network survey. Our results show that the alignment ...
Published on Dec 1, 2013in Strategic Management Journal 5.57
Carmen Weigelt7
Estimated H-index: 7
(Tulane University),
Douglas J. Miller7
Estimated H-index: 7
(UIUC: University of Illinois at Urbana–Champaign)
Knowledge issues are central to governance choice. Organization structure influences knowledge flows and costs of knowledge creation and exchange inside the firm. Yet the question of how a firm's internal structure affects its governance choice for new activities has received scant empirical attention. We examine the role of internal structure, specifically unit autonomy and lateral coordination, in a firm's governance decision for new, knowledge-intensive activities. The findings show that inte...
Published on Oct 1, 2013in Industrial and Corporate Change 1.82
Stephan Manning19
Estimated H-index: 19
(University of Massachusetts Boston),
Thomas Hutzschenreuter16
Estimated H-index: 16
(WHU - Otto Beisheim School of Management),
Alexander Strathmann1
Estimated H-index: 1
(WHU - Otto Beisheim School of Management)
This study examines interface management as a dynamic organizational capability supporting an increasing global distribution of knowledge work, based on an in-depth case of an automotive supplier. We show how local responses to experiences of task and interface ambiguity following the relocation of R&D processes may lead to a shift of organizational attention from ex-ante process design to continuous process and interface management. Findings suggest that flexible interface manager positions and...
Published on Jul 1, 2013in Journal of World Business 5.79
Yadong Luo64
Estimated H-index: 64
(UM: University of Miami),
Stephanie Lu Wang9
Estimated H-index: 9
(UM: University of Miami)
+ 1 AuthorsQinqin Zheng6
Estimated H-index: 6
(Fudan University)
This article examines an important yet understudied issue—the governance mode for business process offshoring (BPO). By applying transaction cost economics and organizational control perspective in the global BPO context, we suggest that BPO's governance mode (foreign captive, joint venture, and independent vendor) is determined by task features, such as knowledge specialization, information security, and process codifiability, and by needed process integration, horizontally between departments ...
Published on May 1, 2013in Organization Science 3.26
C. Chet Miller18
Estimated H-index: 18
(UH: University of Houston),
Nathan T. Washburn7
Estimated H-index: 7
(ASU: Arizona State University),
William H. Glick27
Estimated H-index: 27
(Rice University)
Firm performance is one of the most prominent concepts in organizational research. Despite its importance, and despite the many developmental critiques that have appeared over the years, performance continues to be a difficult concept to apply in a scientifically rigorous way. After surfacing three potentially viable approaches for conceptualizing performance, we find that most studies are internally inconsistent in their use of these approaches, a situation that creates substantial difficulty i...
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