The Making of Design Rules: Implications for organization design

To be presented at the workshop "Organizing the search for technological innovation" Abstract This study analyzes the processes whereby organizations develop radical innovations in response to environmental transformations. It explores the complementary changes in organizational structures, practices and business strategies entailed by the implementation of such innovations. We build upon two streams of research. First, from the research tradition on fit, we borrow the idea that organizations are complex entities made up of interconnected elements in search of coordination to match environmental conditions. Second, from the literature on modularity, we borrow the idea that the evolutionary dynamics of artifacts and organizations are linked by design rules, i.e. a set of principles that allocate functions to components, identify the operating principle of each component and determine the interfaces among modules. Through an in-depth case study of radical innovation in tire manufacturing, we study the joint dynamics of technical and organizational change during the transition from old to new design rules. We argue that technical change and organization adaptation are linked, but that such relationship is mediated and rendered open-ended by the evolution of the underlying bodies of knowledge. 2 1. Introduction This paper analyzes the processes of organizational change in response to environmental transformations and technological innovation. It builds upon the literature on fit analysis of the performance implications of a match (or mismatch) between organizational traits and environmental characteristics. In recent years, the concept of fit has attracted new attention in connection with the idea that organizations should be considered as complex systems constituted of heterogeneous, interconnected elements (e. extant literature on fit aims at developing theoretical typologies or empirical taxonomies in order to map configurations of organizational traits into a defined set of environmental characteristics (e.g. and thus predicts firms' performance. This paper extends this literature focusing not on a given situation of fit (or misfit), but on the dynamic process whereby an organization shifts from one situation of fit to another. Through an in-depth case study of radical change in the tire manufacturing industry (carried out within one of the world's leading company and a recognized innovation leader in the sector, i.e. Pirelli 1), this paper analyzes the processes through which an established organization adapts itself to a changing competitive landscape. The case study develops the idea that the dynamics of organizations depends upon the evolution of the connections among their 'core elements' (Siggelkow, 2002: 126). The evolution …