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Comparing multi-dimensional contingency fit to financial performance of organizations

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  • Nasrallah, Walid F.
  • Qawasmeh, Suleiman J.

Abstract

In theory, it is widely accepted that an organization's optimal structure is contingent upon various situational factors such as market conditions, nature of work and properties of technology. In practice, providing practical advice based on this understanding has been difficult. This paper demonstrates that it is possible to find a correlation between financial performance, as measured by growth in Return on Assets, and degree of compliance with the recommendations of the contingency theory model known as Interaction Value Analysis (IVA). IVA is based on an abstract theoretical representation of organizational work as a series of value-adding interactions among rational value-maximizing agents. Six different dimensions of an organization's situation are represented as parameters of the equation that sums up the value added by all interactions within the organization. This "Multi-dimensional" approach is contrasted with the "Multi-contingency" model, which aggregates the effects of multiple contingent-design rules without considering how the rules overlap or otherwise influence one another. The success of the six-parameter IVA model in partially predicting financial performance is an inducement to expand IVA to include more of the parameters included in the Multi-contingency model.

Suggested Citation

  • Nasrallah, Walid F. & Qawasmeh, Suleiman J., 2009. "Comparing multi-dimensional contingency fit to financial performance of organizations," European Journal of Operational Research, Elsevier, vol. 194(3), pages 911-921, May.
    • Handle: RePEc:eee:ejores:v:194:y:2009:i:3:p:911-921
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    References listed on IDEAS

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    Cited by:

    1. Rae André, 2010. "Assessing the Accountability of Government-Sponsored Enterprises and Quangos," Journal of Business Ethics, Springer, vol. 97(2), pages 271-289, December.
    2. Fariza ACHCAOUCAOU & Merce BERNARDO & Jose M. CASTAN, 2009. "Determinants of Organisational Structures: An Empirical Study," REVISTA DE MANAGEMENT COMPARAT INTERNATIONAL/REVIEW OF INTERNATIONAL COMPARATIVE MANAGEMENT, Faculty of Management, Academy of Economic Studies, Bucharest, Romania, vol. 10(3), pages 566-577, July.
    3. Izaias Martins & Felipe Uribe & Diana Mesa, 2012. "Contribución de la orientación emprendedora a la rentabilidad de las pymes: un análisis contingente considerando la función del entorno," Revista Ecos de Economía, Universidad EAFIT.
    4. Ristanović Vladimir & Primorac Dinko & Mikić Mihaela, 2023. "Application of Multi-Criteria Assessment in Banking Risk Management," Zagreb International Review of Economics and Business, Sciendo, vol. 26(1), pages 97-117.
    5. Izaias Martins, 2016. "Network Usage, Entrepreneurial Orientation and Their Effectiveness on SMEs Growth," Journal of Entrepreneurship and Innovation in Emerging Economies, Entrepreneurship Development Institute of India, vol. 25(1), pages 18-41, March.

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