Complexity theory and organizations

Complexity theory and organizations, also called complexity strategy or complex adaptive
organizations, is the use of the study of complexity systems in the field of strategic management and
organizational studies.[1][2][3][4] It draws from research in the natural sciences that examines uncertainty
and non-linearity.[5] Complexity theory emphasizes interactions and the accompanying feedback loops that
constantly change systems. While it proposes that systems are unpredictable, they are also constrained by
order-generating rules.[6]: 7 4 

Complexity theory has been used in the fields of strategic management and organizational studies.
Application areas include understanding how organizations or firms adapt to their environments and how
they cope with conditions of uncertainty. Organizations have complex structures in that they are dynamic
networks of interactions, and their relationships are not aggregations of the individual static entities. They
are adaptive; in that, the individual and collective behavior mutate and self-organize corresponding to a
change-initiating micro-event or collection of events.[7][8]

Key concepts

Complex adaptive systems

Organizations can be treated as complex adaptive systems (CAS) as they exhibit fundamental CAS
principles like self-organization, complexity, emergence,[9] interdependence, space of possibilities, co-
evolution,[10] chaos,[11][12] and self-similarity.[7][13][14]

CAS are contrasted with ordered and chaotic systems by the relationship that exists between the system and
the agents which act within it.[11] In an ordered system the level of constraint means that all agent behavior
is limited to the rules of the system. In a chaotic system, the agents are unconstrained and susceptible to
statistical and other analyses. In a CAS, the system and the agents co-evolve; the system lightly constrains
agent behavior, but the agents modify the system by their interaction with it. This self-organizing nature is
an important characteristic of CAS; and its ability to learn to adapt, differentiate it from other self-
organizing systems.[7][11][12]

Organizational environments can be viewed as complex adaptive systems where coevolution generally
occurs near the edge of chaos, and it should maintain a balance between flexibility and stability to avoid
organizational failure.[15][11][4][10] As a response to coping with turbulent environments; businesses bring
out flexibility, creativity,[16] agility, and innovation near the edge of chaos; provided the organizational
structure has sufficient decentralized, non-hierarchical network structures.[15][11][4]

Implications for organizational management

CAS approaches to strategy seek to understand the nature of system constraints and agent interaction and
generally takes an evolutionary or naturalistic approach to strategy. Some research integrates computer
simulation and organizational studies.

Complexity theory and knowledge management

Complexity theory also relates to knowledge management (KM) and organizational learning (OL).
"Complex systems are, by any other definition, learning organizations."[17] Complexity Theory, KM, and
OL are all complementary and co-dependent.[17] “KM and OL each lack a theory of how cognition
happens in human social systems – complexity theory offers this missing piece”.[17]

Complexity theory and project management

Complexity theory is also being used to better understand new ways of doing project management, as
traditional models have been found lacking to current challenges.[18]: 2 3  This approaches advocates
forming a "culture of trust" that "welcomes outsiders, embraces new ideas, and promotes
cooperation."[18]: 3 5 

Recommendations for managers

Complexity Theory implies approaches that focus on flatter, more flexible organizations, rather than top-
down, command-and-control styles of management.[6]: 8 4 [4][15]

Additional examples
A typical example for an organization behaving as CAS is Wikipedia[19] – collaborated and managed by a
loosely organized management structure,[19] composed of a complex mix of human–computer
interactions.[20][21][22] By managing behavior, and not only mere content, Wikipedia uses simple rules to
produce a complex, evolving knowledge base which has largely replaced older sources in popular use.

Other examples include the complex global macroeconomic network within a country or group of
countries; stock market and complex web of cross-border holding companies; manufacturing businesses;
and any human social group-based endeavor in a particular ideology and social system such as political
parties, communities, geopolitical organizations, and terrorist networks of both hierarchical and leaderless
nature.[23] This new macro level state may create difficulty for an observer in explaining and describing the
collective behavior in terms of its constituent parts, as a result of the complex dynamic networks of
interactions, outlined earlier.[7]

See also
Complexity theory (disambiguation)
Cynefin Centre for Organisational Complexity
The Santa Fe Institute
Global brain
Self-organization
The New England Complex Systems Institute
Ralph Douglas Stacey
 Complex Adaptive Leadership

References
1. M. Eisenhardt, Kathleen; McKelvey, Bill (2011). Section 29, Complexity Theory and
Corporate Strategy, from book - The SAGE Handbook of Complexity and Management
edited by Peter Allen, Steve Maguire, Bill McKelvey (https://books.google.com/books?id=Bf
O1OTuZmPkC). SAGE, 2011. p. 506 (https://pdfs.semanticscholar.org/e7eb/ce4b9b802d0cd
9437a114ad047a7aa622a19.pdf). ISBN 9781446209745. Retrieved 23 August 2020.
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3. Mak, Wai Ming (2012). Section 7, Rethinking Business Strategy with Complexity Theory,
from book - Systems Theory and Practice in the Knowledge Age, edited by Gillian Ragsdell,
Daune West, Jennifer Wilby (https://books.google.com/books?id=pPcGCAAAQBAJ).
Springer Science & Business Media, 2012. p. 321 (https://link.springer.com/chapter/10.1007/
978-1-4615-0601-0_37). doi:10.1007/978-1-4615-0601-0_37 (https://doi.org/10.1007%2F97
8-1-4615-0601-0_37). ISBN 9781461506010. Retrieved 23 August 2020.
4. L. Levy, David. "Applications and Limitations of Complexity Theory in Organization Theory
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5. Grobman, Gary M. (2005). "Complexity Theory: a new way to look at organizational change"
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9. "Complex Adaptive Systems as a Model for Evaluating Organisational Change Caused by
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44/http://www.uow.edu.au/~kd21/uploads/Diment-complexity.pdf) (PDF). Kieren Diment,
Ping Yu, Karin Garrety, Health Informatics Research Lab, Faculty of Informatics, University of
Wollongong, School of Management, University of Wollongong, NSW. uow.edu.au. Archived
from the original (http://www.uow.edu.au/~kd21/uploads/Diment-complexity.pdf) (PDF) on 5
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ntome.com/grant/NSF/DBI-9201536). Santa Fe Institute. Retrieved 24 August 2020.
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9796/A_Complex_Adaptive_Organization_Under_the_Lens_of_the_LIFE_Model_The_Cas
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arao/5730/The-Internet-Analyzed-as-a-Complex-Adaptive-System). Retrieved 25 August
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4n2_03_Phister.pdf) (PDF). The International C2 Journal. Retrieved 25 August 2012. by
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Further reading
Axelrod, R. A., & Cohen, M. D., 2000. Harnessing Complexity: Organizational Implications of
a Scientific Frontier. New York: The Free Press
Yaneer Bar-Yam (2005). Making Things Work: Solving Complex Problems in a Complex
World. Cambridge, MA: Knowledge Press
Beautement, P. & Broenner, C. 2010. Complexity Demystified: A Guide for Practitioners (htt
p://www.beautement.com/Books/Complexity_Demystified/complexity_demystified.html).
Originally published in Axminster: Triarchy Press
Biermann, F. & Kim, R.E. (Eds). 2020. Architectures of Earth System Governance:
Institutional Complexity and Structural Transformation. Cambridge University Press.
Brown, S. L., & Eisenhardt, K. M. 1997. The Art of Continuous Change: Linking Complexity
Theory and Time-paced Evolution in Relentlessly Shifting Organizations. Administrative
Science Quarterly, 42: 1–34
Burns, S., & Stalker, G. M. 1961. The Management of Innovation. London: Tavistock
Publications
Davis, J. P., Eisenhardt, K. M., & Bingham, C. B. 2009. Optimal Structure, Market Dynamism,
and the Strategy of Simple Rules. Administrative Science Quarterly, 54: 413–452
De Toni, A.F., Comello, L., 2010. Journey into Complexity. Udine: Lulu Publisher
Fonseca, J. (2001). Complexity and Innovation in Organizations. London: Routledge
Douma, S. & H. Schreuder, Economic Approaches to Organizations, 6th edition, Harlow:
Pearson.
Gell-Mann, M. 1994. The Quark and the Jaguar: Adventures in the Simple and the Complex.
New York: WH Freeman
Kauffman, S. 1993. The Origins of Order. New York, NY: Oxford University Press.
Levinthal, D. 1997. Adaptation on Rugged Landscapes. Management Science, 43: 934–950
Liang, T.Y. 2016. Complexity-Intelligence Strategy: A New Paradigmatic Shift. Singapore:
World Scientific Publishing.
March, J. G. 1991. Exploration and Exploitation in Organizational Learning (https://sjbae.pb
works.com/f/march+1991.pdf). Organization Science, 2(1): 71–87
McKelvey, B. 1999. Avoiding Complexity Catastrophe in Coevolutionary Pockets: Strategies
for Rugged Landscapes. Organization Science, 10(3): 249–321
McMillan, E. 2004 Complexity, Organizations and Change. Routledge.ISBN 041531447X
Hardback. ISBN 0-415-39502-X Paperback
Moffat, James. 2003. Complexity Theory and Network Centric Warfare.
Obolensky N. 2010 Complex Adaptive Leadership - Embracing Paradox and Uncertainty
Perrow, C. Complex Organizations: A Critical Essay Scott, Forseman & Co., Glenville,
Illinois
Rivkin, J., W. 2000. Imitation of Complex Strategies. Management Science, 46(6): 824–844
Rivkin, J. and Siggelkow, N. 2003. Balancing Search and Stability: Interdependencies
Among Elements of Organizational Design. Management Science, 49, pp. 290–311
Rudolph, J., & Repenning, N. 2002. Disaster Dynamics: Understanding the Role of Quantity
in Organizational Collapse. Administrative Science Quarterly, 47: 1–30
Schilling, M. A. 2000. Toward a General Modular Systems Theory and its Applicability to
Interfirm Product Modularity. Academy of Management Review, 25(2): 312–334
Siggelkow, S. 2002. Evolution toward Fit. Administrative Science Quarterly, 47, pp. 125–159
Simon, H. 1996 (1969; 1981) The Sciences of the Artificial (3rd Edition) MIT Press
Smith, Edward. 2006. Complexity, Networking, and Effects Based Approaches to
Operations] by Edward
 Snowden, D.J. Boone, M. 2007. "A Leader's Framework for Decision Making". Harvard
Business Review, November 2007, pp. 69–76.
Weick, K. E. 1976. Educational Organizations as loosely coupled systems. Administrative
Science Quarterly, 21(1): 1–19

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