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Unpacking the performance effects of coupling in the environment-organization and intraorganizational levels

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Title: Unpacking the performance effects of coupling in the environment-organization and intraorganizational levels
Authors: Farkas, M
Item Type: Working Paper
Abstract: Discussion of coupling has a long and rich history in the organization theory literature. However, analyses of coupling often do not distinguish between the nature of coupling with the environment and coupling among elements within the organization. We argue that coupling at these different levels are neither independent nor identical. We unpack the performance effects of two forms of hybrid coupling – tight-loose and loose-tight at the environment and intraorganizational levels respectively. We hypothesize that, in stable environments, loose-tight coupling is positively related to firm performance and vice versa. In contrast, in changing environments, the relationship is expected to reverse with loose-tight coupling having a negative relationship with performance. We test our arguments using data from the property and casualty insurance industry in Arkansas, Louisiana, and Kentucky in the wake of hurricane Katrina in 2005. We first show that insurance firms in Louisiana that employ a loose-tight structure generate superior performance in the stable environment before the occurrence of Katrina. However, the same design results in negative performance in the wake of Katrina. We unpack the underlying mechanisms and show that loose-tight firms generated high volumes but lower margins from insurance underwriting before Katrina. In the wake of Katrina, such a loose-tight structure impeded adaptation and necessitated an increase in prices that lowered volumes in the insurance market. We discuss implications of these results for research on how coupling in organizations affect the long term trade-off between responsiveness and flexibility.
Issue Date: 21-Oct-2020
URI: http://hdl.handle.net/10044/1/88805
Publisher: Imperial College London
Copyright Statement: © 2020 copyright The Authors
Publication Status: In preparation
Appears in Collections:Imperial College Business School