The Organizational Design of Spatial Proximity and its Influence on Organizational Learning

Abstract

Designing an organization that can continuously create new knowledge is crucial for a firm’s survival. In this paper, I argue that such organizational goal can be achieved by re-designing the spatial proximity between organizational members’ workspaces. I exploit a unique natural experiment in a large e-commerce company, in which the spatial distances between organizational members’ workspaces were altered in a random manner due to the relocation of the headquarters. My results show that increasing spatial proximity between workspaces of individuals who were previously physically separated leads to more individual-level exploration and higher performance. I also investigate the boundary conditions of this finding. Overall, this study highlights the importance of an under-examined organization design element–the spatial design of organizations–and its implications for organizational learning and firm performance.