Organizational design correlates of entrepreneurship The roles of decentralization and formalization for opportunity discovery and realization

• Published in: Strategic organization Vol. 13; no. 1; pp. 32 - 60
• Main Authors: Foss, Nicolai J, Lyngsie, Jacob, Zahra, Shaker A
• Format: Journal Article
• Language: English
• Published: London, England SAGE 01.02.2015; SAGE Publications; Sage Publications Ltd
• Subjects: Correlation analysis; Decentralization; Entrepreneurship; Management theory; Organizational learning; Organizational structure; Studies; Denmark; research methods; topics and perspectives; regression analysis; entrepreneurship; innovation management; organizational structure; Design and boundaries; firm performance
• ISSN: 1476-1270; 1741-315X
• DOI: 10.1177/1476127014561944

Extant research offers relatively little insight into the organizational design correlates of entrepreneurship in established firms. We argue on theoretical grounds that the same organizational designs support the realization as well as the discovery of opportunities. Specifically, decentralized structures are associated with opportunity realization as well discovery, and this effect is reinforced by formalization. Decentralization gives managers the discretion and autonomy needed to recognize and realize opportunities, while formalization enables the standardization and codification of actions and processes. To test these ideas, we use a data-set based on paired responses from 474 Danish firms operating in several industries for our analyses. We find that decentralization and formalization have direct, positive, and significant associations with opportunity realization. We also address how these organizational design variables are related to opportunity discovery. We find similar effects. We discuss the theoretical and practical implications of our reasoning and results, such as implications for the idea in the innovation and organizational learning literatures that optimal performance over time requires that firms either vacillate between organizational designs or adopt ambidextrous designs.