Measuring organizational wisdom applying an innovative model of analysis

Abstract

Purpose The objective of this paper is to measure the level of organizational wisdom of firms and verify its influence on the value they produce. Design/methodology/approach This study seeks to establish linkage between organizational wisdom and value creation with the development of a new model based on the contributions of North's wisdom matrix and the Jordan and Jones model. The proposed model, using primary data from the Portuguese textile sector, is tested through recourse to a structural equation model. Findings The results point to the conclusion that companies with high organizational wisdom do manage to improve their efficiency and effectiveness but this proves insufficient for actually increasing the level of value created when taking into account the industry's prevailing environment. Practical implications Firms may apply this model to ascertain their level of organizational wisdom. This model may also be deployed to determine this organizational wisdom level for a set of companies (a company cluster) or even a sector. Originality/value The main contribution of this paper stems from the explanatory value of the proposed model as it enables the measurement of a firm's organizational wisdom and its influence on the final value produced.

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