Routines and incentives: the role of communities in the firm

The purpose of this paper is to contribute to clarifying the concept of routines, by focusing on a specific aspect of this concept: namely the question of localization of routines within the organization. We consider that one of the main weaknesses of the theory in the analytical treatment of routines comes from the fact that the local context does not really matter. Our position is that, on the contrary, the local context in which routines emerge and learning takes place does matter, and leads to routines that strongly differ in terms of power of replication, of degree of inertia, of search potential. We base our analysis of the localization of routines on the concept of community. We consider that, as a result of the permanent interaction between the individual and organizational levels, routines are shaped and determined at an intermediate level, the level of communities. Along these lines, we show that the analysis of the localization of routines in the organization has important consequences for our understanding of the specific dimensions of routines (cognitive, co-ordination and motivational), in particular on the incentives and the structure of the firm. Copyright 2003, Oxford University Press.