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REPRI NT NUMBER 56110
FALL 2014 V O L.56 N O. 1
Why Managers
Still Matter
By Nicolai J. Foss and Peter G. Klein
Please note that gray areas refl ect artwork that has been
intentionally removed. The substantive content of the article
appears as originally published.
COURTESY OF THE LEGO GROUP
Why Managers Still Matter
In today’s knowledge-based economy, managerial authority is
supposedly in decline. But there is still a strong need for someone
to define and implement the organizational rules of the game.
BY NICOLAI J. FOSS AND PETER G. KLEIN
ORGANIZATIONAL DESIGN
WE LIVE IN a knowledge-based, rapidly changing, networked world. A supposed hallmark of the
new economy has been the decline of managerial authority. Modern organizations such as online
retailer Zappos have come to favor flat hierarchies with widely distributed authority. We call such
businesses “wikified companies,” using the wiki- prefix to denote the loosely structured, bottom-up,
egalitarian structure popularized by the Wikipedia encyclopedia project and touted by management
thinkers and consultants.1
“Wikifying” the modern business has become a call to arms for some management scholars and
pundits. As Tim Kastelle, a leading scholar on innovation management at the University of
Queensland Business School in Australia, wrote: “It’s time to start reimagining management. Making
everyone a chief is a good place to start.”2
Companies, some of which operate in very traditional market sectors, have been crowing for
years about their systems for “managing without managers”3 and how market forces and well-designed
incentives can help decentralize management and motivate employees to take the initiative.4 For
example, in the 1980s, Johnsonville Sausage, based in Sheboygan Falls, Wisconsin, made a big point
of slashing managerial oversight and putting quality control, personnel management, customer
relations and even business expansion in the hands of worker-managed teams. As CEO Ralph Stayer
explained, “My job ... was to put myself out of a job.”5
THE LEADING
QUESTION
Is managerial
authority
passé?
FINDINGS
The role of manag-
ers needs to be
redefined in today’s
knowledge-based
economy.
Managerial author-
ity remains essential
in situations where
decisions are
time-sensitive,
knowledge is
concentrated and
several decisions
need to be
coordinated.
An important task
for today’s manag-
ers is to define
organizational goals
and principles they
want employees to
apply.
The Lego Group, the Danish toy
company, reduced its number of
management layers in recent
years but also expanded its layer
of top management.
FALL 2014 MIT SLOAN MANAGEMENT REVIEW 73
74 MIT SLOAN MANAGEMENT REVIEW FALL 2014 SLOANREVIEW.MIT.EDU
ORGANIZATIONAL DESIGN
The Industrial Revolution brought the decline
of small-scale, cottage production and the rise of
large, integrated businesses; Adam Smith’s invisi-
ble hand was replaced with what business historian
Alfred D. Chandler Jr. famously described as the
“visible hand” of management.6 But now that pen-
dulum appears to be swinging in another direction.
What Frederick W. Taylor, a pioneer in the field of
scientific management in the late 19th century, saw
as rigidly organized factories of docile and obedi-
ent workers has been eclipsed by loosely structured
teams of highly trained and empowered knowl-
edge workers.7 Indeed, the “visible hand” of
management has morphed into a system of loose
networks, virtual businesses and peer-to-peer
interactions.8
This isn’t to say that strong-minded managers
have become extinct. Many highly successful com-
panies in recent years have been run effectively by
powerful, opinionated figures. For many years at
Apple, for example, CEO Steve Jobs made key deci-
sions in a way that can only be described as
dictatorial. Under Jobs, according to author Adam
Lashinsky, “only one executive ‘owned’ a [profit and
loss statement], and that was the chief financial of-
ficer.”9 From one perspective, this points to an
extreme concentration of authority. But from an-
other it is entirely consistent with the philosophy
behind the wikified company: If functional execu-
tives don’t have to worry about a budget, they can
focus on applying their own specialist knowledge
to meet local demands.
The Lego Group, the Danish toy company, has
recently moved to a more centralized business
model. As Lego reduced its number of manage-
ment layers in recent years, it expanded its layer of
top management, bringing in functional specialists
and moving senior managers much closer to opera-
tions. Thus, Lego is developing a new model:
becoming both more wikified and more manage-
ment-driven. Lego may be part of a broader trend.
In a study about management hierarchies and
compensation at 300 Fortune 500 companies over
14 years, researchers found that while companies
were “de-layering,” the size of the executive team
(defined as the number of positions reporting di-
rectly to the CEO) doubled from an average of five
to 10. What’s more, executives were intervening
more frequently in operating decisions.10 The
result is counterintuitive: Flat management struc-
tures can have more micromanagement than
vertical hierarchies.
Managerial Authority
Is Here to Stay
From our perspective, the view that executive au-
thority is increasingly passé is wrong. Indeed, we
have found that it is essential in situations where
(1) decisions are time-sensitive; (2) key knowledge
is concentrated within the management team; and
(3) there is need for internal coordination. (See
“About the Research.”) Such conditions are hall-
marks of our networked, knowledge-intensive and
hypercompetitive economy.
However, for many everyday business activities,
employees no longer need a boss to direct them to
tasks or to monitor their progress. Such involve-
ment can in fact be demotivating. In a networked
economy characterized by dispersed knowledge re-
siding inside the heads of highly qualified specialists,
leaders need to let go of the notion that things
should be managed from the top. This means that
the definition of “authority” needs to change. Man-
agers need to move away from specifying methods
and processes, in favor of defining the principles
they want people to apply or the goals they want
people to meet. In other words, executives can
design the rules of the game without specifying the
actions of the players. Wikipedia cofounder Jimmy
Wales doesn’t control the content of Wikipedia
entries, for example, but he and his colleagues did
design the structure — such as the format of the
entries, the means by which they are revised and the
procedures for resolving disputes — within which
the enterprise operates.11
Authority doesn’t replace leadership, as some
have argued; rather, it is a type of leadership.12 Be-
sides established guidelines for rewards, instruction,
rules and communication, something else is needed
to help employees react to changes and act when
unexpected events occur. For example, in emer-
gency situations, employees don’t want to have to
wait for permission from the boss to respond —
they need to have a general understanding of “how
things are done here.” Effective leaders excel at
defining such frameworks. Letting organizational
SLOANREVIEW.MIT.EDU FALL 2014 MIT SLOAN MANAGEMENT REVIEW 75
culture emerge and percolate on its own, without
deliberate structure and design, can lead to a num-
ber of problems — not the least of which is a
rough-and-tumble culture that favors certain em-
ployees at the expense of others.13
There are other aspects to the frameworks under
which employees act and cooperate. Today’s em-
ployees are expected to multitask, acquire new skills
and collaborate through knowledge sharing. At the
same time, companies are made up of employees
with increasingly diverse skills and work forces that
are increasingly heterogeneous. Many multina-
tional corporations must face an extreme version
of this challenge. Some skills are so highly special-
ized and complex that managers don’t even know
exactly what their employees can do.
The new environment suggests the need for a
redefinition of the traditional managerial role. De-
spite all the changes that have occurred, there is a
strong need for someone to define the organiza-
tional framework within which a business operates.
We argue that, in the knowledge economy, the main
task for top management is to define and imple-
ment these organizational rules of the game.
To be sure, procedures for defining rules and
frameworks can themselves be delegated and
nested. As management consultant Gary Hamel
points out, “more and more of the work of manag-
ing and leading — the work of setting priorities,
devising strategy, reviewing performance, divvying
up work and allocating rewards — is going to be
distributed to the edges of the organization.”14 But
managers at the center will still maintain a pivotal
role in determining both what and how to delegate.
A particularly important aspect of organizational
design is what economists call “incentive instru-
ments” — the formal and informal elements that
motivate employees. Not only do these instruments
have to be designed, they also must work together. A
“soft” culture that encourages employees to collabo-
rate may be difficult to align with strong performance
incentives. Finding the right mix is crucial.
What’s more, in a fast-moving economy, man-
agers must revisit the design of the company’s
incentive instruments frequently because compa-
nies change their activities and organizational
structures and add new employees with possibly
different values. There may be a need to change in-
centive formulas — how much is tied to individual,
team or company performance. Incentives may
need to be strengthened or weakened. Lincoln Elec-
tric, a global manufacturer of welding equipment
headquartered in Cleveland, Ohio, has maintained
an elaborate system of performance incentives for
more than 80 years. It may seem that the company’s
reward system is so well designed that the company
basically “runs itself.” In actuality, however, the sys-
tem has been tweaked continually.15
There are economies of scale and learning econo-
mies in the task of adjusting incentives, which
suggests it should be centralized. Boards of directors
have compensation committees to fulfill this func-
tion; companies have managers. Further, when a
company’s key assets are knowledge workers whose
skills and behaviors are difficult to assess objectively,
companies need to increasingly rely on more subjec-
tive assessments of performance, which must be
carried out and enforced by managers.
ABOUT THE RESEARCH
This article is based on several years of
empirically and practically based research
into the internal organization of leading
companies. We have studied and con-
sulted with companies in the medical
devices, toy, manufacturing and financial
services industries and concluded that or-
ganizational design — decision authority,
incentive structures, monitoring systems
and the like — is often more important
than culture, tacit capabilities and other
“softer” elements of organizational
structure and behavior, not only for
mature companies but for emerging
businesses and industries as well. Our
research includes case studies of single
companies and statistical analysis of
large data sets.
We offer a general, theoretical expla-
nation for how entrepreneurial initiative,
innovation and responsibility should be
distributed within companies in our re-
cent book, Organizing Entrepreneurial
Judgment.i In addition, Foss has pub-
lished several quantitative, survey-based
articles on delegation within companiesii
and has coauthored Innovating Organiza-
tion and Management,iii which includes
case studies about the changing internal
organization of Danish companies. With
Tina Saebi, Foss is editing a forthcoming
book on business model innovation,
Business Model Innovation: The Organi-
zational Dimension (Oxford University
Press, in press) that focuses on how
managerial authority and organizational
design support business model innova-
tion. Klein has published empirical
studies on how large companies organize
themselves to balance authority and
empowerment in financial services and
manufacturing and how technology,
market conditions and organizational
structure coevolve.iv
76 MIT SLOAN MANAGEMENT REVIEW FALL 2014 SLOANREVIEW.MIT.EDU
ORGANIZATIONAL DESIGN
When Managerial
Authority Is Needed
In knowledge-based, networked economies, market
advantage is often based on surprising competitors
with new products, processes, organizational forms
and business models. Apple’s iPhone, for example,
redefined the smartphone category, a shock from
which BlackBerry, Nokia and other once-dominant
players subsequently struggled to recover. Similarly,
taxi companies and hotel chains didn’t anticipate the
sudden popularity of ride- and room-sharing ser-
vices such as Lyft, Uber and Airbnb. Business history
is packed with examples of companies that were
blindsided: producers of tubes for amplifiers (sur-
prised by the transistor), makers of minicomputers
(surprised by the introduction and diffusion of the
personal computer), vertically integrated steel pro-
ducers (surprised by minimills) and so forth.
Many companies that survived major shocks to
technology, regulation and global competition have
had strong, charismatic leaders with highly authori-
tative styles. In what was arguably one of the greatest
corporate comebacks of all time, Steve Jobs, faced
with a major restructuring, rescued Apple by mak-
ing tough decisions against considerable resistance
(for example, cutting its Newton personal digital as-
sistant platform and setting up a partnership with
Microsoft). It is no coincidence that many of the
best known successful corporate turnarounds are
pinned to single individuals, such as Jobs at Apple,
Sam Palmisano at IBM and Carlos Ghosn at Nissan.
Clearly, organizations use different approaches
to make decisions. Executive teams and self-manag-
ing work groups often rely on dialogue and
consensus. Dialogue can be followed by voting, as in
cooperatives. Alternatively, group decisions can be
made by decentralizing decisions as far as possible.
Such approaches have their advantages. Dialogue
and consensus may give employees a sense of em-
powerment and psychological ownership, and may
produce decisions that commit. Decentralized deci-
sion making allows employees to make use of their
own specialized knowledge without having to con-
sult with their superiors. But, as we have noted,
there are conditions where managerial authority is
critical: when there is urgency to the decision mak-
ing; when decisive knowledge is concentrated in the
top management team; and when there needs to be
tight interdependence between multiple decisions.
Decision-Making Urgency Some decisions, such
as company-level strategic decisions and those in-
volving large transactions, must be made quickly.
Even if the decisions turn out in hindsight to be
suboptimal, making them rapidly may be neces-
sary if the costs of delay are significant. Although
companies may seek to increase decision-making
speed through technology and open, interactive
work environments, decisions that need to be
made rapidly are still best left in the hands of one
senior manager or a small handful of them. These
individuals may possess crucial information about
what needs to be done; having to take the time to
share the information would delay and possibly
undermine the decision.
The bottom line is that centralizing decision au-
thority can often reduce the delays resulting from
more collaborative and consensus-driven approaches.
This seems consistent with the observed tendencies of
organizations of all kinds (including armies and hos-
pitals) to rely on centralized authority in cases of
unforeseen emergency. More important, centralizing
authority can also make better use of what we call
“decisive” knowledge.16
Decisive Knowledge Information is needed for
making good decisions. The decision maker’s
knowledge doesn’t have to be perfect, however, just
good enough. Knowledge is good enough if the de-
cision maker would make the same decision even if
In knowledge-based, networked economies, market
advantage is often based on surprising competitors
with new products, processes, organizational forms
and business models.
SLOANREVIEW.MIT.EDU FALL 2014 MIT SLOAN MANAGEMENT REVIEW 77
he or she had access to additional information —
information that may be costly to obtain. The
economic principle of weighing marginal benefits
against marginal costs teaches us that manufactur-
ing quality doesn’t need to be perfect, only good
enough: beyond a certain threshold, eliminating
manufacturing defects adds more to production
costs than to sales revenues. Likewise, after a certain
point, the cost of getting additional knowledge may
be more than it is worth. For example, if sales in a
particular market follow a regular, seasonal pattern,
it may not pay to do an expensive demand-fore-
casting exercise; the additional information would
add little to estimates based on historical data. In
this case, the existing sales data is good enough to
make a rational decision.
Understanding when knowledge is decisive is im-
portant for organizational design. Decision makers at
the lower end of the organizational hierarchy typi-
cally have access to better information about
conditions in local markets than do their supervisors.
This argues for delegating authority to them. But if
the supervisor already has enough information to
make an informed decision — in other words, if the
supervisor has decisive knowledge — then delega-
tion may be harmful. Delegation allows for the
possibility that the local decision maker will use the
local knowledge to achieve his or her own goals at the
expense of the overall corporate mission. If local
knowledge is highly valuable, this risk may be worth-
while. Otherwise, it makes sense to allow those with
decisive knowledge to make the call, even if others
have marginally better information.
Interdependence Between Decisions Different
factors affecting a decision can be more or less inter-
dependent. For example, accelerating the spread of
electric vehicles requires having a number of things in
place, including technical interface standards, deals
with energy suppliers and well-located recharging sta-
tions. Coordinating the involvement of multiple
parties takes lots of resources, which is why many
companies often prefer to manage complex activities
in house. They need things to be tightly coordinated,
and working with outside parties can mean letting
others have veto power over key decisions.
The economic theory of complementarities
describes this kind of interdependence.17 When
business activities, relationships, technology and reg-
ulation are complementary, it is hard to make
incremental changes to the system: changing one
element of the system requires changing others. Com-
mercializing genetically modified products, for
HOW TO MIX AUTHORITY AND EMPOWERMENT
How can executives distribute authority more effectively? What is the right
level of empowerment, and how do the different elements of organizational
design work together? To determine how and when to use authority, consider
the following questions:
1. Do you have a need for speed? Which is more important, getting deci-
sions exactly right or deciding quickly — and right enough? If time is of the
essence — if there is a high degree of decision-making urgency — then
allowing senior managers to make the decisions without relying on dialogue
and consensus may be better for the organization.
2. What do employees know, and when do they know it? For a given deci-
sion, is the critical knowledge held by senior managers, middle managers or
lower-level employees? Can knowledge at lower levels of the company be
neatly summarized and communicated to higher-level managers? The “wikified
company” model assumes that the relevant knowledge is tacit and widely dis-
persed, so that decision authority should be delegated as far as possible. But
this is not always the case. Employees closer to the action often have better
knowledge about local conditions. But senior managers may have more infor-
mation about corporate strategy, overall market conditions, legal or regulatory
issues and other things that are just as important. It may be possible to relay
some of the local information to top managers.
3. What knowledge really matters? What does each decision maker need to
know to make the right decision? Is gaining additional information worth more
than it costs? Is decisive knowledge sufficiently represented at the top manage-
ment level? Even if senior managers don’t know everything they’d like to know,
they may know everything they need to know to make decisions that are “good
enough.”
4. Have employee rights and responsibilities become entitlements? Do
employees feel they own their budgets and decision rights? Taking away deci-
sion rights poses particular challenges. The behavioral economics concept of
loss aversion comes into play: People tend to value things they had and lost
more highly than things they have never had. The gains from centralization
must be strong to overcome these costs, and managers must be prepared to
explain clearly why the changes are needed.
5. Does the company have a well-functioning procedural justice system?
Does your company have reliable, established and transparent procedures for
explaining structural changes to employees? Can you explain why autonomy
must be curtailed? Do employees feel that their concerns about autonomy and
responsibility are heard and taken seriously?
6. Does your company’s planning include changes in company structure?
Company structure and overall strategy need to be aligned. Company structure
is very much about who holds decision-making authority over company assets.
Major strategic changes are usually accompanied by changes in company struc-
ture. Strategic planning should take into account what structural changes are
required to facilitate strategic changes, such as changes in the business model.
78 MIT SLOAN MANAGEMENT REVIEW FALL 2014 SLOANREVIEW.MIT.EDU
ORGANIZATIONAL DESIGN
example, requires companies to invest in the underly-
ing technologies. But it also requires complementary
investments — in seed marketing, intellectual
property rights protection, processing and delivery
mechanisms that separate GMO and non-GMO
products, and so on. Not surprisingly, given the need
for tight coordination, the biotechnology revolution
has required agricultural production and distribution
to become more vertically integrated.
Mixing Authority and Delegation
While companies cannot exist and thrive in a dy-
namic world without authority, they also need to
develop mechanisms for decentralizing and dele-
gating. Many companies have board-approved
“delegation of authority” policies that specify the
division of labor among the company’s leadership
team and the board. However, delegation of author-
ity over company assets, including employee time,
can be pushed down in the organization. Authority
over decisions can also be delegated by making the
top leadership group larger. What is the right mix
between authority held at the top level and dele-
gated authority over the use of company assets?
Our framework provides part of the answer.
(See “How to Mix Authority and Empowerment,”
p.77.) If fast decision making is essential, the
knowledge held by senior managers is highly deci-
sive and activities are highly interdependent, then
centralized authority is necessary. Decision-mak-
ing authority should be in the hands of the CEO
and the extended leadership team.
Determining the right size of the leadership team
has been the subject of much debate.18 The average
large U.S. company has a management team of 10.
However, as the number grows, it’s common for fac-
tions to form and tension to arise.19 Although Lego
thrives with a top management team of more than
20, many of the team members are located in differ-
ent geographical locations. Fault lines may be less
likely to form within a distributed team.
The psychological forces that limit the size of top
management teams are less relevant for how decision-
making authority should be distributed in the
organization. After all, friction between divisions or
business units is fairly common and does not necessar-
ily cause problems. However, there are psychological
forces that managers should pay attention to.
First, employees develop feelings of entitlement.
They come to believe they really do “own” the bud-
gets and accounts they control. Experimental
research suggests that individuals attach particu-
larly high valuations to what they own (or believe
they own).20 Shifting decision-making authority
from middle managers to the top management
team may frustrate managers who feel something
has been “stolen” from them. However, in dynamic,
highly competitive economies, senior managers
must be able to adjust organizational structures to
adapt to changing environments. By definition, this
will involve changing job descriptions and deci-
sion-making authority.
Second, no one likes to be overruled. Although
everyone knows that senior managers can overrule
middle managers, prudent senior managers will in-
tervene only when strictly necessary. Concern about
being overruled can cause middle managers to ques-
tion what authority they really have. Frequent
meddling by superiors without an obvious reason
can make middle managers anxious and less inclined
to act. Research shows that overruling by senior
managers harms motivation and productivity.21
To be sure, in a dynamic business environment
some amount of overruling is to be expected. It
should be minimized, however. For senior managers,
this means accepting some decisions even without a
detailed justification rather than investing time and
effort to gain all the necessary information. If em-
ployee decisions are to be overruled, procedural
justice concerns are all-important: Employees need
to be told carefully and patiently why their decisions
are being reversed.
Senior managers must be able to adjust organizational
structures to adapt to changing environments. By
definition, this will involve changing job descriptions
and decision-making authority.
FALL 2014 MIT SLOAN MANAGEMENT REVIEW 79PLEASE NOTE THAT GRAY AREAS REFLECT ARTWORK THAT HAS BEEN INTENTIONALLY REMOVED.
THE SUBSTANTIVE CONTENT OF THE ARTICLE APPEARS AS ORIGINALLY PUBLISHED.
Third, if top management holds too much deci-
sion-making authority, it is difficult to harness
employee-specific knowledge and motivate em-
ployees to make good decisions. But the presence of
dispersed, valuable, tacit knowledge is not a trump
card that counters all the potential advantages of
centralization, even in the wikified economy.
Management practice has always been closely
intertwined with broad societal trends. Anti-
authoritarianism has been a strong force in many
parts of the world since World War II, reinforced by
the counterculture of the 1960s. We think the
“wikified company” trend reflects a similar distrust
of authority and a belief that treating employees
as responsible, autonomous and intelligent indi-
viduals pays off. This view tracks a more general
sense that, thanks to the Internet, mobile telephony
and social networks, we are in a new age of collab-
oration, participation and sharing. Vertical
relationships are being replaced by horizontal ones,
and hierarchy is giving way to what Harvard Law
School professor Yochai Benkler calls “commons-
based peer production” not only in business but
also in culture, politics and society at large.22
We sympathize with this ethos, which in a num-
ber of ways is an improvement over the paternalism
of an earlier age. Managers may want to embrace it,
not just to be in accordance with the zeitgeist but
also because it is likely to pay off, since it leads to a
better use of employee knowledge and increases the
motivation of those employees who are skeptical of
authoritarian management. That said, managers
must be careful not to understate the continuing
rationale and benefits of managerial authority,
even in the wikified economy.
Much innovation activity is shifting toward
business model innovation. For example, in the face
of declining opportunities for future blockbusters,
many big pharmaceuticals companies are trying to
remain competitive by developing new business
models with a heavy service dimension. IBM’s 2006
Global CEO Study revealed that CEOs saw business
model innovation as the most important kind of in-
novation, and there is no indication that it has
become any less important.23 Business model inno-
vation involves strategic and organizational change
processes in which decision-making urgency, deci-
sive knowledge and tight interdependence are often
key. When such innovation takes a company into
uncharted territory, there is massive uncertainty.
This only elevates the importance of senior man-
ager intuition and foresight. The top management
team not only must define the direction but also
needs to get involved in the everyday experimenta-
tion and decision making that make the new
business model come alive. Many decisions cannot
be delegated because so much of the essential
knowledge and initiative are concentrated at the
top echelons.
For all of these reasons, we think the reports
about the death of managerial authority are greatly
exaggerated. In today’s world, managerial authority
needs to be exercised smartly. Talking about an
ethos of participation but acting in ways that are in
direct contradiction is a recipe for disaster. Mana-
gerial authority still works — but it needs to be
accompanied by strong, credible communication
and a commitment to fair procedure.
Nicolai J. Foss is a professor of strategic manage-
ment and globalization at the Copenhagen Business
School and a professor at the Norwegian School of
Economics in Bergen, Norway, and the Warwick
80 MIT SLOAN MANAGEMENT REVIEW FALL 2014 SLOANREVIEW.MIT.EDU
ORGANIZATIONAL DESIGN
Business School in Coventry in the United Kingdom.
Peter G. Klein is a professor in the division of
applied social sciences at the University of Missouri
in Columbia and a professor at the Norwegian
School of Economics. Comment on this article at
http://sloanreview.mit.edu/x/56110, or contact
the authors at smrfeedback@mit.edu.
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More Bureaucracy,” New York Times, April 30, 2014.
14. G. Hamel, “This is How Bureaucracy Dies,” Fortune,
April 16, 2014.
15. See, for example, B.G. Posner, “Right From the
Start,” Inc., Aug. 1, 1988; and F. Koller, “Spark: How
Old-Fashioned Values Drive a Twenty-First-Century
Corporation” (New York: PublicAffairs, 2010).
16. N.J. Foss and P.G. Klein, “Organizing Entrepreneurial
Judgment: A New Approach to the Firm” (Cambridge,
U.K.: Cambridge University Press, 2012).
17. P. Milgrom and J. Roberts, “Complementarities and
Fit: Strategy, Structure, and Organizational Change in
Manufacturing,” Journal of Accounting and Economics
19, no. 2-3 (1995): 179-208.
18. J. Useem, “How to Build a Great Team,” Fortune,
June 1, 2006.
19. D. van Knippenberg, J.F. Dawson, M.A. West and
A.C. Homan, “Diversity Faultlines, Shared Objectives
and Top Management Team Performance,” Human
Relations 64, no. 3 (March 2011): 307-336.
20. See D. Kahneman, J.L. Knetsch and R.H. Thaler,
“Experimental Tests of the Endowment Effect and the
Coase Theorem,” Journal of Political Economy 98, no. 6
(December 1990): 1325-1348.
21. S.L. Robinson and D.M. Rousseau, “Violating the Psy-
chological Contracts: Not the Exception but the Norm,”
Journal of Organizational Behavior 15, no. 3 (May 1994):
245-259.
22. Y. Benkler, “The Wealth of Networks: How Social Pro-
duction Transforms Markets and Freedom” (New Haven,
Connecticut: Yale University Press, 2006).
23. IBM Global Business Services, “Expanding the
Innovation Horizon: The Global CEO Study 2006,” n.d.,
www.ibm.com.
i. Foss and Klein, “Organizing Entrepreneurial Judgment.”
ii. Foss, “Selective Intervention and Internal Hybrids”;
N.J. Foss, K. Laursen and T. Pedersen, “Linking Cus-
tomer Interaction and Innovation: The Mediating Role
of New Organizational Practices,” Organization Science
22, no. 4 (July-August 2011): 980-999; and N.J. Foss,
J. Lyngsie and S. Zahra, “The Role of External Knowl-
edge Sources and Organizational Design in the Process
of Opportunity Exploitation,” Strategic Management
Journal 34, no. 12 (December 2013): 1453-1471.
iii. N.J. Foss, T. Pedersen, J. Pyndt and M. Schultz,
“Innovating Organization and Management: New
Sources of Competitive Advantage” (Cambridge, U.K.:
Cambridge University Press, 2012).
iv. P.G. Klein and M.R. Saidenberg, “Organizational
Structure and the Diversification Discount: Evidence
From Commercial Banking,” Journal of Industrial Eco-
nomics 58, no. 1 (March 2010): 127-155; P.G. Klein,
“Were the Acquisitive Conglomerates Inefficient?”
RAND Journal of Economics 32, no. 4 (winter 2001):
745-761; and H.S. James, Jr., P.G. Klein and M.E.
Sykuta, “The Adoption, Diffusion, and Evolution
of Organizational Form: Insights from the Agrifood
Sector,” Managerial and Decision Economics 32,
no. 4 (June 2011): 243-259.
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