UCL School of Management is delighted to welcome Oliver Alexy, TU Munich, to host a research seminar discussing: DOUBLE VISION: THE INTERPLAY OF STRATEGY AND STRUCTURE IN NEW VENTURES.

Abstract:

“Alice […] went on. ‘Would you tell me, please, which way I ought to go from here?’

‘That depends a good deal on where you want to get to,’ said the Cat. ‘I don’t much care where—’ said Alice.

‘Then it doesn’t matter which way you go,’ said the Cat. ‘—so long as I get SOMEWHERE,’ Alice added as an explanation. ‘Oh, you’re sure to do that,’ said the Cat, ‘if you only walk long enough.”

Lewis Carroll, Alice’s Adventures in Wonderland, pp. 71-72

How to address the uncertainty inherent in new venture creation is of central concern to scholars of strategy, entrepreneurship, and organization design (e.g., Alexy, Poetz, Puranam, & Reitzig, 2021; Camuffo, Cordova, Gambardella, & Spina, 2020; Cohen, Hallen, & Bingham, 2019; Davis, Eisenhardt, & Bingham, 2009; Felin & Zenger, 2017; Gans, Stern, & Wu, 2019; Ott, Eisenhardt, & Bingham, 2017; Zellweger & Zenger, 2023; Zuzul & Tripsas, 2020). Uncertainty (Knight, 1921) entails that ventures initially lack the requisite knowledge to form effective strategies (i.e., the choices they make as they undertake activities to create and capture value: Ott & Eisenhardt, 2020; Rumelt, 2011) and to set up effective organizational structures (i.e., “a stable pattern of interaction among individuals or a group of individuals”: Puranam, 2018: 8).

A vibrant body of research has advanced our understanding of how ventures develop strategy under uncertainty by examining the cognition and action pathways through which they reactively or proactively develop new knowledge. By reacting to feedback from their environment, new ventures can learn form and adapt to external sources of knowledge and improve their odds of survival (e.g., Bremner & Eisenhardt, 2021; Kirtley & O’Mahony, 2020; Ott & Eisenhardt, 2020; Rindova & Kotha, 2001). In contrast, ventures that proactively deploy experimental interventions may find themselves able to generate new knowledge systematically and realize novel offerings (e.g., Camuffo et al., 2024; Camuffo, Gambardella, & Pignataro, 2024; Felin, Gambardella, & Zenger, 2024; Felin & Zenger, 2017). These approaches to knowledge generation also imply whether founders conceive of uncertainty as an obstacle or an opportunity to action, by approaching their market environments as stable or malleable (Alvarez & Barney, 2010; Felin, Gambardella, Novelli, & Zenger, 2024; Rindova & Courtney, 2020; Rindova & Martins, 2024; Sergeeva, Bhardwaj, & Dimov, 2021; Shackle, 1972).

Yet, amid the focus on approaches to developing strategy under uncertainty, explanations for how these link to new ventures’ organizational structures remain underdeveloped. The often implicit assumption is that organizational structure will follow the choice of strategy, such that both will fit (e.g., Gans et al., 2019; McDonald & Eisenhardt, 2020; Rao & Sutton, 2014; Wuebker, Zenger, & Felin, 2023). But for each venture that consists of more than a single founder, generating new knowledge to develop strategy inevitably also features an emergent organizational structure that guides these efforts (Burgelman, 1983; Puranam, Alexy, Reitzig, 2014). From the start, founders will decide—deliberately or not—to commit resources and attention to perform certain activities at the expense of others (Alexy et al., 2021; Siggelkow, 2002), and thereby gradually specify the “roles, rights, and rules that shape and constrain the actions of the organization’s members and specify how the organization should operate” (DeSantola & Gulati, 2017: 642).[1] Initial structure thus co-determines the kind of knowledge an organization can generate and draw on to develop strategy (Reetz & Rindova, 2024), and given potentially lasting inertial effects (Baron, Burton, & Hannan, 1996; Beckman & Burton, 2008; Tripsas, 2009), enables or constrains the strategies a new venture will be able to pursue over time (Burgelman, 2002; Gavetti & Rivkin, 2007; Siggelkow, 2001).

Thus, that new ventures’ organizational structure and strategy will co-evolve in a systematic and complementary fashion is anything but given. With the saliency of strategy in both research and practice, beyond assuming that evolutionary dynamics will differ between firms focusing on knowledge generation through adaptation or intervention (e.g., Ambos & Birkinshaw, 2010), we can know little about the actual co-evolution of strategy and structure over the initial stages of venture emergence (e.g., Alexy et al., 2021; Siggelkow & Rivkin, 2003; Siggelkow, 2001; Wasserman, 2008). In this paper, we therefore address this important and understudied question, asking: How does the interplay of strategy and structure affect new venture emergence, based on how founders generate new knowledge to reduce uncertainty?

By conducting a longitudinal study of over a dozen new ventures, we observed two distinct modes in which they developed their strategy and structure, we label leaping and integrating. Ventures in the leaping mode developed discontinuously, in multi-directional jumps, and resulted in more hierarchical and centralized structures. In turn, ventures in the integrating mode developed near linearly, with small incremental changes, and resulted in relatively flat and decentralized structures. We trace back the origins of ventures operating in either mode to how their cofounders articulated their intentions for developing their businesses and the specific ‘knowledge problems’ they set out to solve (i.e., their individual business ideas and what they needed to know to implement them). The novel finding is that whether they approached these problems as present opportunities in existing markets or future possibilities in imagined markets, introduced temporal focal points that directed the founders’ exploration and selection of strategic choices (i.e., actors’ cognition and action toward solving the respective problem) as well as co-determined the emerging organizational structures of these ventures (i.e., their initial organizational design); which over time, produced the two clearly distinguishable emergence pathways. Building on these insights, we argue that developing strategy and organizational structure, under uncertainty, poses a dual challenge, and that the ability to address it may explain differences in agency founders can achieve. We found that ventures in the integrating mode were actively addressing this dual challenge. Their future possibility focus led founders to initiate strategy development and organization design such that it could be updated and refined—looking backward from the future allowed for informed decisions that retained the direction of emergence. In contrast, ventures in the leaping mode, amid their present opportunity focus, led founders prioritize strategy development that was highly responsive to external feedback, which in turn determined frequent and significant changes to their organization designs—looking forward to the future led to ad-hoc decisions that resulted in changing directions of emergence.

Our study stresses the recursive relationship between strategy and structure in early phases of organizational emergence, explaining why organizations can systematically differ regarding the trajectories on which they emerge and the type of organizational designs they establish.