IDEAS home Printed from https://ideas.repec.org/p/aal/abbswp/01-16.html
   My bibliography  Save this paper

Selective Intervention and Internal HybridsInterpreting and Learning from the Rise and Decline of the Oticon Spaghetti Organization

Author

Listed:
  • Nicolai J. Foss

Abstract

Infusing hierarchies with elements of market control has become a much-used way of simultaneously increasing entrepreneurialism and motivation in firms. However, this paper argues that such “internal hybrids,” particularly in their radical forms, are inherently hard to successfully design and implement, because of fundamental credibility problems related to managerial promises to not intervene in delegated decision-making ¾ an incentive problem that is often referred to as the “problem of selective intervention.” This theoretical theme is developed and illustrated, using the case of the world-leading Danish hearing aids producer, Oticon. In the beginning of the 1990s, Oticon became famous for its radical internal hybrid, the ”spaghetti organization.” Recent work has interpreted the spaghetti organization as a radical attempt to foster dynamic capabilities by imposing loose coupling on the organization, neglecting, however, that about a decade later, the spaghetti organization has given way to a more traditional matrix organization. This paper presents an organizational economics interpretation of organizational changes in Oticon, and argues that a strong liability of the spaghetti organization was the above incentive problem. Motivation in Oticon was strongly harmed by selective intervention on the part of top-management Changing the organizational structure was one means of repairing these motivational problems. Refutable implications are developed, both for the understanding of efficient design of internal hybrids, and for the more general issue of the distinction between firms and markets, as well as the choice between internal and external hybrids.

Suggested Citation

  • Nicolai J. Foss, 2001. "Selective Intervention and Internal HybridsInterpreting and Learning from the Rise and Decline of the Oticon Spaghetti Organization," DRUID Working Papers 01-16, DRUID, Copenhagen Business School, Department of Industrial Economics and Strategy/Aalborg University, Department of Business Studies.
  • Handle: RePEc:aal:abbswp:01-16
    as

    Download full text from publisher

    File URL: https://wp.druid.dk/wp/20010016.pdf
    Download Restriction: no
    ---><---

    References listed on IDEAS

    as
    1. Nicolai J. Foss, 1996. "Firms, Incomplete Contracts and Organizational Learning," DRUID Working Papers 96-2, DRUID, Copenhagen Business School, Department of Industrial Economics and Strategy/Aalborg University, Department of Business Studies.
    2. Peter Maskell, 1996. "Localised Low-tech Learning in the Furniture Industry," DRUID Working Papers 96-11, DRUID, Copenhagen Business School, Department of Industrial Economics and Strategy/Aalborg University, Department of Business Studies.
    Full references (including those not matched with items on IDEAS)

    Citations

    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
    as


    Cited by:

    1. Kirsten Foss & Nicolai J. Foss & Peter G. Klein, 2006. "Original and Derived Judgment An Entrepreneurial Theory of Economic Organization," DRUID Working Papers 06-09, DRUID, Copenhagen Business School, Department of Industrial Economics and Strategy/Aalborg University, Department of Business Studies.
    2. Markus C. Becker & Nathalie Lazaric & Richard R. Nelson & Sidney G. Winter, 2005. "Applying organizational routines in understanding organizational change," Industrial and Corporate Change, Oxford University Press, vol. 14(5), pages 775-791, October.
    3. Lam, Alice & Lambermont-Ford, Jean-Paul, 2008. "Knowledge Creation and Sharing in Organisational Contexts: A Motivation-Based Perspective," MPRA Paper 11488, University Library of Munich, Germany.
    4. Nathalie Lazaric & Alain Raybaut, 2007. "Knowledge, Hierarchy and incentives: Why human resource policy and trust matter," Post-Print hal-00453292, HAL.
    5. Kirsten Foss & Nicolai J. Foss, "undated". "Authority and Discretion: Tensions, Credible Delegation, and Implications for New Organizational Forms," IVS/CBS Working Papers 2002-08, Department of Industrial Economics and Strategy, Copenhagen Business School.
    6. Silvia Dominguez-Martinez & Randolph Sloof & Ferdinand von Siemens, 2010. "Monitoring your Friends, not your Foes: Strategic Ignorance and the Delegation of Real Authority," CESifo Working Paper Series 3172, CESifo.
    7. Robert Gibbons, 2010. "Inside Organizations: Pricing, Politics, and Path Dependence," Annual Review of Economics, Annual Reviews, vol. 2(1), pages 337-365, September.
    8. Lam, Alice, 2004. "Organizational Innovation," MPRA Paper 11539, University Library of Munich, Germany.
    9. Oliver Baumann & Nils Stieglitz, 2011. "Motivating Organizational Search," DRUID Working Papers 11-08, DRUID, Copenhagen Business School, Department of Industrial Economics and Strategy/Aalborg University, Department of Business Studies.
    10. Kjærgaard, Annemette, 2004. "Internal corporate venturing during organisational change:," Working Papers 2004-19, Copenhagen Business School, Department of Informatics.
    11. Agnès Festré & Nathalie Lazaric, 2007. "Routines and leadership in Schumpeter and von Mises' analysis of economic change," Post-Print halshs-00271338, HAL.
    12. Nicolai J. Foss, 2006. "The Emerging Knowledge Governance Approach Challenges and Characteristics," DRUID Working Papers 06-10, DRUID, Copenhagen Business School, Department of Industrial Economics and Strategy/Aalborg University, Department of Business Studies.
    13. Akin Osman Kazakçi & Thomas Gillier & Gérald Piat, 2008. "Investigating co-innovation in exploratory partnerships: An analytical framework based on design theory," Post-Print hal-00417247, HAL.
    14. Lars Lindkvist, 2004. "Governing Project-based Firms: Promoting Market-like Processes within Hierarchies," Journal of Management & Governance, Springer;Accademia Italiana di Economia Aziendale (AIDEA), vol. 8(1), pages 3-25, March.
    15. Rebecca Henderson & Sarah Kaplan, 2005. "Inertia and Incentives: Bridging Organizational Economics and Organizational Theory," NBER Working Papers 11849, National Bureau of Economic Research, Inc.

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Foss Kirsten & Foss Nicolai & Klein Peter G. & Klein Sandra K., 2002. "Heterogeneous Capital, Entrepreneurship, and Economic Organization," Journal des Economistes et des Etudes Humaines, De Gruyter, vol. 12(1), pages 1-20, March.
    2. John A. Mathews, 2001. "Competitive Interfirm Dynamics within an Industrial Market System," DRUID Working Papers 01-01, DRUID, Copenhagen Business School, Department of Industrial Economics and Strategy/Aalborg University, Department of Business Studies.
    3. Bengt-Åke Lundvall & Frank Skov Kristensen, 1997. "Organisational Change, Innovation and Human Resource Development as a Response to Increased Competition," DRUID Working Papers 97-16, DRUID, Copenhagen Business School, Department of Industrial Economics and Strategy/Aalborg University, Department of Business Studies.
    4. Alice Lam, 2003. "Organizational Learning in Multinationals: R&D Networks of Japanese and US MNEs in the UK," Journal of Management Studies, Wiley Blackwell, vol. 40(3), pages 673-703, May.
    5. Björn Johnson & Olman Segura-Bonilla, 2001. "Innovation Systems and Developing Countries Experiences from the SUDESCA Project," DRUID Working Papers 01-12, DRUID, Copenhagen Business School, Department of Industrial Economics and Strategy/Aalborg University, Department of Business Studies.
    6. Keld Laursen & Valentina Meliciani, 2000. "The importance of technology-based intersectoral linkages for market share dynamics," Review of World Economics (Weltwirtschaftliches Archiv), Springer;Institut für Weltwirtschaft (Kiel Institute for the World Economy), vol. 136(4), pages 702-723, December.
    7. Nicolai J. Foss, 2001. "Economic Organization in the Knowledge Economy Some Austrian Insights," DRUID Working Papers 01-07, DRUID, Copenhagen Business School, Department of Industrial Economics and Strategy/Aalborg University, Department of Business Studies.
    8. Keld Laursen & Ammon Salter, 2005. "The fruits of intellectual production: economic and scientific specialisation among OECD countries," Cambridge Journal of Economics, Oxford University Press, vol. 29(2), pages 289-308, March.
    9. Dieter Ernst, 1999. "Responses to the Crisis Constraints to a Rapid Trade Adjustment in East Asia´s Electronics Industry," DRUID Working Papers 99-2, DRUID, Copenhagen Business School, Department of Industrial Economics and Strategy/Aalborg University, Department of Business Studies.
    10. Dieter Ernst, 1998. "Catching-Up, Crisis and Industrial Upgrading. Evolutionary Aspects of Technological Learning in Korea's Electronics Industry," DRUID Working Papers 98-16, DRUID, Copenhagen Business School, Department of Industrial Economics and Strategy/Aalborg University, Department of Business Studies.
    11. Nicolai J. Foss, 2001. "The Problem With Bounded Rationality On Behavioral Assumptions in the Theory of the Firm," DRUID Working Papers 01-15, DRUID, Copenhagen Business School, Department of Industrial Economics and Strategy/Aalborg University, Department of Business Studies.
    12. Bengt-Åke Lundvall, 2002. "The University in the Learning Economy," DRUID Working Papers 02-06, DRUID, Copenhagen Business School, Department of Industrial Economics and Strategy/Aalborg University, Department of Business Studies.
    13. Adolfo Nemirovsky & Gabriel Yoguel, 2001. "Dynamics of High-Technology Firms in the Silicon Valley," DRUID Working Papers 01-03, DRUID, Copenhagen Business School, Department of Industrial Economics and Strategy/Aalborg University, Department of Business Studies.
    14. Gabriel Yoguel & Marta Novick & Anabel Marin, 2000. "Production Networks Linkages, Innovation Processes and Social Management Technologies. A Methodological Approach Applied to the Volkswagen case in Argentina," DRUID Working Papers 00-11, DRUID, Copenhagen Business School, Department of Industrial Economics and Strategy/Aalborg University, Department of Business Studies.
    15. Nicolaj J. Foss & Volker Mahnke, 2003. "Knowledge Management What Can Organizational Economics Contribute?," DRUID Working Papers 03-02, DRUID, Copenhagen Business School, Department of Industrial Economics and Strategy/Aalborg University, Department of Business Studies.
    16. Ionara Costa, 2001. "Ownership and Technological Capabilities in Brazil," DRUID Working Papers 01-06, DRUID, Copenhagen Business School, Department of Industrial Economics and Strategy/Aalborg University, Department of Business Studies.
    17. Nicolai J. Foss, 2001. "Bounded Rationality in the Economics of Organization Present Use and (Some) Future Possibilities," DRUID Working Papers 01-13, DRUID, Copenhagen Business School, Department of Industrial Economics and Strategy/Aalborg University, Department of Business Studies.
    18. Keld Laursen, 1998. "Do Export and Technological Specialisation Patterns Co-evolve in Terms of Convergence or Divergence? Evidence From 19 OECD Countries, 1971-1991," DRUID Working Papers 98-18, DRUID, Copenhagen Business School, Department of Industrial Economics and Strategy/Aalborg University, Department of Business Studies.
    19. Kirsten Foss & Nicolai J. Foss, 1999. "Organizing Economic Experiments The Role of Firms," DRUID Working Papers 99-5, DRUID, Copenhagen Business School, Department of Industrial Economics and Strategy/Aalborg University, Department of Business Studies.
    20. Jukka Kaisla, 1998. "The Market Process and the Emergence of the Firm Some Indications of Entrepreneurship Under Genuine uncertainty," DRUID Working Papers 98-17, DRUID, Copenhagen Business School, Department of Industrial Economics and Strategy/Aalborg University, Department of Business Studies.

    More about this item

    Keywords

    Internal hybrids; organizational change; delegation; managerial commitment problems; new organizational forms;
    All these keywords.

    JEL classification:

    • M14 - Business Administration and Business Economics; Marketing; Accounting; Personnel Economics - - Business Administration - - - Corporate Culture; Diversity; Social Responsibility
    • O31 - Economic Development, Innovation, Technological Change, and Growth - - Innovation; Research and Development; Technological Change; Intellectual Property Rights - - - Innovation and Invention: Processes and Incentives

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:aal:abbswp:01-16. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Keld Laursen (email available below). General contact details of provider: https://www.druid.dk/ .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.