Bounded Rationality and the Search for Organizational Architecture: An Evolutionary Perspective on the Design of Organizations and Their Evolvability

Abstract

We employ a computational model of organizational adaptation to answer three research questions: (1) How does the architecture or structure of complexity affect the feasibility and usefulness of boundedly rational design efforts? (2) Do efforts to adapt organizational forms complicate or complement the effectiveness of first-order change efforts? and (3) To what extent does the rate of environmental change nullify the usefulness of design efforts? We employ a computational model of organizational adaptation to examine these questions. Our results, in identifying the boundary conditions around successful design efforts, suggest that the underlying architecture of complexity of organizations, particularly the presence of hierarchy, is a critical determinant of the feasibility and effectiveness of design efforts. We also find that design efforts are generally complementary to efforts at local performance improvement and identify specific contingencies that determine the extent of complementarity. We discuss the implications of our findings for organization theory and design and the literature on modularity in products and organizations.

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