Description
In times of digitalization, organizations are transforming to become more agile. Decentralizing decision-making to lower levels of the organization allows firms to better detect changes in their environment and to sense new opportunities. Simultaneously, the digital transformation of a firm is increasingly relying on a flexible IT function. This study explores how decentralization of decision-making power increases organizational agility and to what extent this relationship is dependent on IT flexibility. We conducted a quantitative study using two rounds of surveys with 123 respondents from the consulting industry. Based on covariance-based SEM, we find that too much flexibility of the IT function in combination with decentralized decision-rights creates a complexity trap and, thus, decreases organizational agility. These findings carry several theoretical contributions for organizational agility research and shed new light on the role of IT flexibility for digital transformation.
The Complexity Trap – Limits of IT Flexibility for Supporting Organizational Agility in Decentralized Organizations
In times of digitalization, organizations are transforming to become more agile. Decentralizing decision-making to lower levels of the organization allows firms to better detect changes in their environment and to sense new opportunities. Simultaneously, the digital transformation of a firm is increasingly relying on a flexible IT function. This study explores how decentralization of decision-making power increases organizational agility and to what extent this relationship is dependent on IT flexibility. We conducted a quantitative study using two rounds of surveys with 123 respondents from the consulting industry. Based on covariance-based SEM, we find that too much flexibility of the IT function in combination with decentralized decision-rights creates a complexity trap and, thus, decreases organizational agility. These findings carry several theoretical contributions for organizational agility research and shed new light on the role of IT flexibility for digital transformation.