It is difficult to make large, complex organizations like MNCs ambidextrous—to make them efficient so that they succeed in the short run and in sync with their changing environments so that they succeed and survive in the long run. The two types of learning activity that support ambidexterity, exploitation and exploration, are fundamentally different (March 1991). The well-known structural approach to creating organizational ambidexterity employs separate subunits for exploitation and exploration (O’Reilly and Tushman 2011). We argue that this approach cannot take full advantage of the high levels of product, geographic, and functional diversity that exist in large, complex firms to create ambidexterity at a more macro level. Firms facing this kind of complexity often address it by using a matrix structure. For such firms, we argue that a more flexible form of matrix structure can facilitate the creation of a new form of ambidexterity at the macro level of such firms. As developed in Egelhoff and Wolf (Egelhoff and Wolf 2017), a flexible matrix structure is one which can vary its mode of decision making between balanced decision making, where decisions are jointly made by both dimensions of a matrix, and rule-based decision making, where it is pre-specified which dimension of a matrix will unilaterally make certain types of decision. We argue that rule-based decision making tends to facilitate exploitation and the refinement of existing knowledge while balanced decision making tends to facilitate exploration and the development of new knowledge. By specifying one mode of decision making or the other, firm-level management can deliberately steer important strategic decisions (e.g., new product technology development) into either exploitation or exploration and strategy renewal, creating a new form of ambidexterity at the macro level.
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As developed by Nickerson and Zenger (2002), Siggelkow and Levinthal (2003), and Boumgarden et al. (2012), the sequential or temporal approach to ambidexterity describes a firm randomly vacillating between a decentralized organization design (which facilitates local exploration at the business unit level) and a centralized organization design (which facilitates exploitation and efficiency by providing more coordination across the business units). Our definition of ambidexterity, which requires the emphasis on exploration or exploitation to rationally vary within a firm by strategy, is clearly not consistent with the sequential approach, where an entire firm and all of its strategies randomly vacillate in unison between exploitation and exploration. As a result, this approach will not be discussed.
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Professor William G. Egelhoff, a leading scholar in the field of international management, passed away in April 2019. The Editors have decided to publish this article. It is the last contribution Professor Egelhoff has worked on.
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Egelhoff, W.G. How a Flexible Matrix Structure Could Create Ambidexterity at the Macro Level of Large, Complex Organizations Like MNCs. Manag Int Rev 60, 459–484 (2020). https://doi.org/10.1007/s11575-020-00418-7
- Multinational corporations
- Organization structure
- Matrix structure