In Organizations as Adaptive Systems in Complex Environments: The Case of China, Max Boisot and John Child argue that organizations have to match the complexity of their environments. The article defines complexity as the number of elements that compose a system as well as the number of interactions that occur within it. Coupling also plays a role; the more loosely coupled part of system is, the more complexity exists. Using a model that the authors call the Informational Space or the I-Space, the authors are able to analyze the complexity of an organization. The I-Space has is built around a few core concepts, including abstraction, diffusion, and codification.
Organizations can adapt to their environment through either complexity reduction or complexity absorption. Organizations that employ complexity reduction act on the complexity of the environment directly, while organizations that utilize complexity absorption tend to hedge risks. Complexity reduction creates a more specialized organization while absorption may limit the goodness of fit between an organization and its environment, but it allows the organization to react to many different types of situations; more so than more specialized organizations.
The article discusses that complexity is greatly increased as the number of its internal parts that interact increase. As complexity of an organization increases, so does the amount of energy an organization has to expend to maintain itself. The rest of the article compares and contrasts the types of complexity in China versus those of the Western world. In short, Western organizations tend to minimize the level of cognitive complexity while Chinese firms embrace it.
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