Selective Intervention and Internal Hybrids: Interpreting and Learning from the Rise and Decline of the Oticon Spaghetti Organization

By N. J. Foss. Organ. Sci., 2003

445 citations recorded by the source corpus.

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 a fundamental incentive problem of establishing credible managerial commitments to not intervene in delegated decision making. This theme is developed and illustrated, using the case of the world-leading 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 organizational means, neglecting, however, that about a decade later the spaghetti organization has given way to a more traditional matrix organization. In contrast, an organizational economics interpretation of Oticon organizational changes is developed. This lens suggests that a strong liability of the spaghetti organization was the above incentive problem: Frequent managerial meddling with delegated rights led to a severe loss of motivation, and arguably caused the change to a more structured organization. Refutable implications are developed, and the discussion is broadened to more general issues of economic organization.

Subfields: Accounting, Economics and Econometrics, Strategy and Management

View Paper: https://www.semanticscholar.org/paper/69dde95575bab106354df11ce93caa59b07b133f

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Citations in the corpus

The institutional origins of dynamic capabilities in multinational enterprises (2010, background): “On one hand, such problems include motivation and commitment issues that are caused by the inability of the headquarters to make a credible commitment not to interfere in the management of subsidiaries that have gained a mandate (Foss, 2003).”
Applying Organizational Routines in understanding organizational change (2005, background): “Because of the great complexity that often characterizes actual routines in firms, problems in describing them in detail, and lack or inefficacies of instruments to influence actual processes, managerial influence is always subject to limits when it comes to influencing routines as they are actually”
Designing the Boundaries of the Firm: From Make, Buy, or Ally to the Dynamic Benefits of Vertical Architecture (2006, unknown): “Rather than engaging in “selective intervention” (Foss 2003, Williamson 1985, Zenger and Hesterly 1997), Fashion Inc. engaged in “selective information infusion,” to create performance targets for its divisions and guide effort and resource allocation.”
Theories of the Firm-Market Boundary (2011, unknown): “Furthermore, again, “in their radical forms, [hybrids] are inherently hard to successfully design and implement” (Foss, 2003: 331).”
Knowledge (2017, background): “Knowledge creation by such ‘horizontal communities’ may require appropriate intervention for regulating their creativity (Miles and Snow, 1992; Miles et al., 1997; Foss, 2003).”
Configurational paths to organizational innovation: qualitative comparative analyses of antecedents and contingencies (2014, background): “Qualitative case studies provide thick descriptions of particular organizations, introducing discreet novel organizational practices and procedures and offering a fine-grained analysis of the contextual factors whose interplay shapes such effort (e.g., Birkinshaw, Crainer, & Mol, 2007; Birkinshaw & ”
Linking Customer Interaction and Innovation: The Mediating Role of New Organizational Practices (2011, background): “On a related note, we extend the argument in the innovation literature (e.g., Laursen and Foss 2003, Love and Roper 2009) on the impact on innovation of complementary organizational practices beyond its focus on exploiting and combining internally held knowledge to include knowledge held by…”
Team theory, garbage cans and real organizations: some history and prospects of economic research on decision‐making in organizations (2003, result): “Furthermore, the repeated-game’s emphasis on credibility (and on the fragility of credibility) accords well with Foss’s (2002) analysis of the rise and decline of the ‘spaghetti’ organization at the Danish firm Oticon, where very substantial authority was initially delegated to subordinates but then”