Complexity theory and organizations

Short description: Application of complexity theory to strategy

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]: 74

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]

## Contents

* 1 Key concepts
* 1.1 Complex adaptive systems
* 2 Implications for organizational management
* 2.1 Complexity theory and knowledge management
* 2.2 Complexity theory and project management
* 2.3 Recommendations for managers
* 3 Practical examples
* 4 See also
* 5 References
* 6 Further reading

## 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][11][12] chaos,[13][14][11][12] and self-similarity.[7][15][11][12]

CAS are contrasted with ordered and chaotic systems by the relationship that exists between the system and the agents which act within it.[13] 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][13][14][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.[16][13][4][10][11][12] As a response to coping with turbulent environments; businesses bring out flexibility, creativity,[17] agility, and innovation near the edge of chaos; provided the organizational structure has sufficient decentralized, non-hierarchical network structures.[16][13][4][11]

## 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."[18] Complexity Theory, KM, and OL are all complementary and co-dependent.[18] “KM and OL each lack a theory of how cognition happens in human social systems – complexity theory offers this missing piece”.[18]

### 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.[19]: 23 This approaches advocates forming a "culture of trust" that "welcomes outsiders, embraces new ideas, and promotes cooperation."[19]: 35

### 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]: 84 [4][16]

## Practical examples

A typical example for an organization behaving as CAS is Wikipedia,[20] which is collaborated and managed by a loosely organized management structure[20] that is composed of a complex mix of human–computer interactions.[21][22][23] By managing behavior, and not only content, Wikipedia uses simple rules to produce a complex, evolving knowledge base that has largely replaced older sources in popular use.[citation needed]

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.[24]

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. SAGE, 2011. p. 506. ISBN 9781446209745. https://books.google.com/books?id=BfO1OTuZmPkC. Retrieved 23 August 2020.
2. ↑ Forgues, Bérnard; Thietart, Alain (2011). Section 2, Complexity science and organization, from book - The SAGE Handbook of Complexity and Management edited by Peter Allen, Steve Maguire, Bill McKelvey. SAGE, 2011. p. 53. ISBN 9781446209745. https://books.google.com/books?id=BfO1OTuZmPkC&pg=PA53. Retrieved 23 August 2020.
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. Springer Science & Business Media, 2012. p. 321. doi:10.1007/978-1-4615-0601-0_37. ISBN 9781461506010. https://books.google.com/books?id=pPcGCAAAQBAJ. Retrieved 23 August 2020.
4. ↑ 4.0 4.1 4.2 4.3 L. Levy, David. "Applications and Limitations of Complexity Theory in Organization Theory and Strategy". umb.edu. http://www.faculty.umb.edu/david_levy/complex00.pdf.
5. ↑ Grobman, Gary M. (2005). "Complexity Theory: a new way to look at organizational change". Public Administration Quarterly 29 (3): 351–384. doi:10.1177/073491490502900305. http://www.complexityforum.com/members/Grobman 2005 Complexity theory.pdf. Retrieved 2016-07-10.
6. ↑ 6.0 6.1 Burnes, Bernard (2005). "Complexity theories and organizational change". International Journal of Management Reviews 7 (2): 73–90. doi:10.1111/j.1468-2370.2005.00107.x.
7. ↑ 7.0 7.1 7.2 7.3 "Insights from Complexity Theory: Understanding Organisations better". by Assoc. Prof. Amit Gupta, Student contributor - S. Anish, IIM Bangalore. http://tejas.iimb.ac.in/articles/12.php.
8. ↑ "Ten Principles of Complexity & Enabling Infrastructures". by Professor Eve Mitleton-Kelly, Director Complexity Research Programme, London School of Economics. http://psych.lse.ac.uk/complexity/Papers/Ch2final.pdf.
9. ↑ "Complex Adaptive Systems as a Model for Evaluating Organisational Change Caused by the Introduction of Health Information Systems". 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. http://www.uow.edu.au/~kd21/uploads/Diment-complexity.pdf.
10. ↑ 10.0 10.1 Kauffman, Stuart (15 January 1992). "Coevolution in Complex Adaptive Systems". Santa Fe Institute. https://grantome.com/grant/NSF/DBI-9201536.
11. ↑ 11.0 11.1 11.2 11.3 11.4 11.5 Terra, Leonardo Augusto Amaral; Passador, João Luiz (2016). "Symbiotic Dynamic: The Strategic Problem from the Perspective of Complexity". Systems Research and Behavioral Science 33 (2): 235. doi:10.1002/sres.2379.
12. ↑ 12.0 12.1 12.2 12.3 12.4 Terra, L. A. A.; Passador, J. L. (2019). "The nature of social organization of production: From firms to complex dynamics". Systems Research and Behavioral Science 36 (4): 514–531. doi:10.1002/sres.2567.
13. ↑ 13.0 13.1 13.2 13.3 13.4 Berreby, David (1 April 1996). "Between Chaos and Order: What Complexity Theory Can Teach Business". strategy-business.com. http://www.strategy-business.com/article/15099?gko=d48d4.
14. ↑ 14.0 14.1 Birkinshaw, Julian (11 November 2013). "Managing Complexity Is the Epic Battle Between Emergence and Entropy". Harvard Business Review. https://hbr.org/2013/11/managing-complexity-is-the-epic-battle-between-emergence-and-entropy. Retrieved 23 August 2020.
15. ↑ "Page 3, Similar fundamental between CAS and organisations, from paper "Ten Principles of Complexity & Enabling Infrastructures"". by Professor Eve Mitleton-Kelly, Director Complexity Research Programme, London School of Economics. http://psych.lse.ac.uk/complexity/Papers/Ch2final.pdf.
16. ↑ 16.0 16.1 16.2 B. Porter, Terry. "Coevolution as a research framework for organizations and the natural environment". University of Maine. https://forestbioproducts.umaine.edu/wp-content/uploads/sites/202/2010/10/Porter.Coev-Proofs.pdf.
17. ↑ A Lambert, Philip (June 2018). "The Order-Chaos Dynamic of Creativity". University of New Brunswick. https://www.researchgate.net/publication/328890717.
18. ↑ 18.0 18.1 18.2 McElroy, Mark W. (2000). "Integrating complexity theory, knowledge management and organizational learning". Journal of Knowledge Management 4 (3): 195–203. doi:10.1108/13673270010377652. https://www.researchgate.net/publication/237279219. Retrieved 20 March 2016.
19. ↑ 19.0 19.1 Saynisch, Manfred (2010). "Beyond frontiers of traditional project management: An approach to evolutionary, self-organizational principles and the complexity theory—results of the research program". Project Management Journal 41 (2): 21–37. doi:10.1002/pmj.20159.
20. ↑ 20.0 20.1 Faucher, Jean-Baptiste. A Complex Adaptive Organization Under the Lens of the LIFE Model:The Case of Wikipedia. https://otago.academia.edu/JeanBaptisteFaucher/Papers/489796/A_Complex_Adaptive_Organization_Under_the_Lens_of_the_LIFE_Model_The_Case_of_Wikipedia. Retrieved 25 August 2012.
21. ↑ "The Internet Analyzed as a Complex Adaptive System". http://spacecollective.org/aloksubbarao/5730/The-Internet-Analyzed-as-a-Complex-Adaptive-System.
22. ↑ "Cyberspace: The Ultimate Complex Adaptive System". The International C2 Journal. http://www.dodccrp.org/files/IC2J_v4n2_03_Phister.pdf. by Paul W. Phister Jr
23. ↑ "Complex Adaptive Systems". mit.edu. 2001. http://web.mit.edu/esd.83/www/notebook/Complex Adaptive Systems.pdf. by Serena Chan, Research Seminar in Engineering Systems
24. ↑ "Toward a Complex Adaptive Intelligence Community The Wiki and the Blog". D. Calvin Andrus. cia.gov. https://www.cia.gov/library/center-for-the-study-of-intelligence/csi-publications/csi-studies/studies/vol49no3/html_files/Wik_and_ Blog_7.htm.

## Further reading

* Axelrod, R. A.; Cohen, M. D. (2000). Harnessing Complexity: Organizational Implications of a Scientific Frontier. New York: The Free Press.
* Bar-Yam, Yaneer (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. Axminster: Triarchy Press. http://www.beautement.com/Books/Complexity_Demystified/complexity_demystified.html. Retrieved 19 July 2025.
* Biermann, Frank; Kim, R. E. (2020). yes. ed. Architectures of Earth System Governance: Institutional Complexity and Structural Transformation. Cambridge University Press. doi:10.1017/9781108784641. ISBN 978-1-108-78464-1.
* Brown, S. L.; Eisenhardt, K. M. (1997). "The Art of Continuous Change". Administrative Science Quarterly 42: 1–34. doi:10.2307/2393807.
* 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 (3): 413–452. doi:10.2189/asqu.2009.54.3.413.
* 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.; Schreuder, H. (2013). Economic Approaches to Organizations (6th ed.). 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 (7): 934–950. doi:10.1287/mnsc.43.7.934.
* 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". Organization Science 2 (1): 71–87. doi:10.1287/orsc.2.1.71. https://sjbae.pbworks.com/f/march+1991.pdf. Retrieved 19 July 2025.
* McKelvey, B. (1999). "Avoiding Complexity Catastrophe in Coevolutionary Pockets". Organization Science 10 (3): 249–321. doi:10.1287/orsc.10.3.294.
* McMillan, E. (2004). Complexity, Organizations and Change. London: Routledge. ISBN 041531447X.
* Moffat, James (2003). Complexity Theory and Network Centric Warfare.
* Obolensky, Nick (2010). Complex Adaptive Leadership – Embracing Paradox and Uncertainty.
* Perrow, C.. Complex Organizations: A Critical Essay. Glenville, Illinois: Scott, Foresman & Co..
* Rivkin, J. W. (2000). "Imitation of Complex Strategies". Management Science 46 (6): 824–844. doi:10.1287/mnsc.46.6.824.11940.
* Rivkin, J.; Siggelkow, N. (2003). "Balancing Search and Stability". Management Science 49: 290–311. doi:10.1287/mnsc.49.3.290.12740.
* Rudolph, J.; Repenning, N. (2002). "Disaster Dynamics: Understanding the Role of Quantity in Organizational Collapse". Administrative Science Quarterly 47: 1–30. doi:10.2307/3094889.
* Schilling, M. A. (2000). "Toward a General Modular Systems Theory". Academy of Management Review 25 (2): 312–334. doi:10.2307/259016.
* Siggelkow, S. (2002). "Evolution toward Fit". Administrative Science Quarterly 47: 125–159. doi:10.2307/3094893.
* Simon, H. A. (1996). The Sciences of the Artificial (3rd ed.). Cambridge, MA: MIT Press.
* Smith, Edward (2006). Complexity, Networking, and Effects Based Approaches to Operations.
* Snowden, D. J.; Boone, M. (2007). "A Leader's Framework for Decision Making". Harvard Business Review: 69–76.
* Weick, K. E. (1976). "Educational Organizations as Loosely Coupled Systems". Administrative Science Quarterly 21 (1): 1–19. doi:10.2307/2391875.

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