Microdivisionalization as a way toward dynamic capability

Abstract

PurposeAs entrepreneurial top management teams in multidivisional forms are typically treated in pertinent literature as the default organizational solutions for developing dynamic capabilities, the emerging innovative organizational forms tend to be overlooked, even though they could be a viable means of transforming established enterprises. The present case study examines how Haier's microenterprise and platforms influenced the firm's dynamic capabilities development.Design/methodology/approachThe paper presents a qualitative case study of Haier Group Corporation in China.FindingsThe findings indicate that Haier employed a loosely coupled relationship between its headquarters and the microenterprises, developed quasi market-based exchange relationships and established peer-to-peer learning opportunities and coordination among its microenterprises. Data analyses further revealed that Haier has adopted three-step routines to capture market opportunities and enhance operational efficiency. This research extends the sensing-seizing-reconfiguration model typically recommended in the existing literature. It also demonstrates that organizational configuration is an important aspect of dynamic innovation. In summary, the study results showcase microdivisionalization as a new way for developing dynamic capabilities to better adapt to the ever-changing market environments.Originality/valueIn summary, our study showcased microdivisionalization as a new way for firms to change the organization structure and business strategies to better adapt to the ever-changing market environments.

The process of developing dynamic capabilities: The conceptualization attempt and the results of empirical studies

“…The literature indicates that the management systems of companies using the concept of dynamic capabilities should be characterized by a high level of decentralization [ 91 – 93 ], providing flexibility and allowing a rapid response to changes in the environment. This is also the view expressed by Volberda and Elfring, according to which developing dynamic capabilities requires the use of an adhocratic structure, in terms of Mintzberg, or an organic structure [ 94 ].…”

The strategy and change interface: understanding “enabling” processes and cognitions

“…In addition to the Chen et al (2021) paper, the other two papers by Ferreira et al (2021) and the Bhasin and Found (2021) also demonstrate the benefits of modularity by binding different parts of an organization and working with external alliance partners to achieve a common investment end. By recognizing this and the “non-redeployability” or specificity of their complementary offerings and associated resource bases, it is clear that by making the joint objective of value creation the priority, the inevitable existence of incomplete contracts do not constrain; “ecosystems add value as they allow managers to coordinate their multilateral dependence through sets of roles that face similar rules, thus obviating the need to enter into customized contractual agreements with each partner” (Jacobides et al , 2018, p. 2,255).…”

“…The first paper by Chen et al (2021), Microdivisionalization as a way toward dynamic capability , uses single case study techniques to understand if Haier's innovativeness is related to how company headquarters interacts with its microdivisions. The authors found that consistent with Teece's (2007) microfoundations of (sustainable) enterprise performance framework, the innovation routines established at Haier's over 2,000 microdivisions, in conjunction with a loosely coupled relationship with head office, are key to explaining Haier's success.…”

“…In summary, these three papers have in common the fact that structures were deliberately developed to make it (relatively) easy for people to engage in strategic projects and other strategic work while avoiding the problems normally associated with centralization (excessive bureaucracy, slow decision-making and disincentives to innovate) and decentralization (poor resource allocation, siloing, the inability to implement aligned strategies). For instance, the Chen et al (2021) paper provides insight into how microdivisionalization, supported by enabling functional and decision-making platforms, helped to avoid situations where head office was unable to recognize the value of the opportunities and threats the divisions were uncovering, instead allowing head office to better sense and appreciate when a technology could be levered across the whole group, seizing and reconfiguring the technological base as required. This is while avoiding the problems associated with centralization and excessive divisionalization (Stinchombe, 1990).…”

“…Understanding these mediators helps explain why managers adopt different types of controls” (Kownatzki et al , 2013, p. 1,316). The Chen et al (2021) paper helps us understand how this new way of organizing, that is, via over 2,000 microdivisions, makes it possible for both vertical and horizontal alignment to occur, and how a supportive, internal ecosystem, involving the hierarchy is able to evolve, enhancing the organization's sensing, seizing and reconfiguring capabilities. However, it was acknowledged by the authors that at Haier, sensing, seizing and reconfiguring were more about mobilizing the right resources and preparing to seize and execute.…”