Professional service firms, knowledge-based competition, and the heterarchical organization form

Abstract

Professional service organizations, such as advertising agencies, software development fi rms, accounting organizations, and consulting or R&D fi rms, operate in competitive environments driven by an imperative of fl exibility and rapid learning (Empson, 2001; Starbuck, 1992). Superior competitive positions in knowledge- based industries derive from greater agility and more valuable knowledge creation for problem-solving relative to that of competitors (Eisenhardt & Martin, 2000; Teece, Pisano, & Shuen, 1997). The organizational implications of knowledge- based competition are clearly illustrated in the commercial software business, where the internet gave rise to open source communities such as Linux or the Apache Foundation. In such organizations, the plurality of distrib-uted intelligence is managed by principles of decentralization of authority and self- organization (Parhankangas et al., 2005). Similarly, the advertising industry has been described as having project ecology, in which temporary organizational architectures of learning are negotiated between diff erent actors within and outside the fi rm (Grabher, 2001, 2002, 2004).The key idea of project ecology is that a fi rm is not a coherent entity organized around clearly defi ned communication and authority structures. Rather, project ecologies provide arenas “in which incongruent physical and organizational layers are ‘stapled’ for a limited period of time—just to be reconfi gured anew in the context of subsequent projects” (Grabher, 2002: 259). Other examples from technical consultancy (Miles & Snow, 1995), management consultancy (Alvesson, 1995), international accounting (Brown, Cooper, Greenwood, & Hinings, 1996; Reihlen, Albers, & Kewitz, 2009), virtual customer environments (Nambisan & Baron, 2010), medical trauma centers (Faraj & Xiao, 2006), and fi nancial services (Sydow, 2004; Sydow & Windeler, 1998) show that an increasing amount of knowledge work is organized in ways that supplant typical Weberian categories of hierarchy and fi rm- centered approaches to organizational design

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