Adaptation of the boundary system in growing firms: an agent-based computational study on the role of complexity and search strategy

Abstract

The boundary system of a firm is intended to set constraints to the behaviour of organisational participants and, by this, to affect decision-making in the direction of the firm’s overall objective. In growing firms, the boundary system is subject to a particular tension: balancing the search for new opportunities and innovation with behavioural constraints to deal with increasing size and intra-organisational complexity. Against this background, the paper studies the adaptation of the boundary system in growing firms. For this, an agent-based simulation based on the framework of NK fitness landscapes is employed which is a rather new approach in the domain of management control systems. The study controls for different levels of task complexity and for different styles in firms’ search for new opportunities in terms of exploitative, explorative or ambidextrous search strategies. The results suggest that the level of task complexity subtly interferes with the search strategy employed in respect of the emerging boundaries. In particular, results support the conjecture that growing task complexity leads to more coordination via hierarchy. However, the search strategy employed shapes the predominance of boundaries compared to less constraining modes of coordination granting higher levels of autonomy to subordinates.