When organizational complexity helps corporation improve its performance

Abstract

Purpose – The purpose of this paper is to test the assertion that the relationship between corporation performance and organizational complexity follows an inverted U-shape curve, and a corporation gains the best performance when its organizational complexity fits its environmental complexity. Design/methodology/approach – This research did not directly measure environmental complexity to verify the relationship between corporation performance and complex environment, but measured organizational complexity to subtly display the effect of the organizational complexity on the corporation performance while controlled the environmental complexity. To do so, a set of corporations that shared the similar environment was selected, and then these corporations’ performance and organizational complexity were calculated, the related hypotheses were tested empirically. Findings – The paper proved the inverted U-shape relationship between organizational complexity and corporation performance, and also found that different corporation chooses different complex adaptive way, so the inverted U-shape relationship displays hierarchy. Research limitations/implications – Future research should search out to calculate corporation’s environment complexity the fitness of organizational complexity for testing hypotheses. Practical implications – The regularity of relationship between organizational complexity and corporation performance is helpful for managers to understand that a way to improve a corporation’s performance is to enhance the fitness of organizational complexity and environmental complexity. Social implications – Organizational complexity may be competitive advantage, but excessive growth of it will be harmful. Originality/value – Usually organizational complexity is thought of as a negative factor to corporation performance and tends to be constrained, but this research explored the role of organizational complexity to corporation performance and the findings helps managers to understand when to enhance organizational complexity and when to weaken it. The methodology of calculating the fitness of organizational complexity and environmental complexity by fixing environment is a contribution to complexity theory research.