Beyond Differentiation and Integration: The Challenges of Managing Internal Complexity in Federations

Abstract

In this paper we examine the management of internal complexity in federations as a means of shedding new light on how the challenges inherent in governing these forms of inter-organizational networks are managed. Our analysis reveals that these networked organizations differed as a function of their approach to four complexity management activities: perspective shifting, shaping interactions, managing standards and constructing commitment. Based on the use of these four activities we identify three approaches to complexity management in this study – leveraging complexity, suppressing complexity and disengaging from complexity. Each of these approaches differed in their focus on differentiation or integration in the implementation of complexity management activities. We found that only leveraging complexity went beyond separate management activities aimed at differentiation or integration and employed policies and activities that possessed the capacity to optimize both simultaneously. In doing so, our study highlights new possibilities for complexity management by revealing the ways in which management activities can be designed to optimize both integration and differentiation.