Technology, Innovation, and Globalization’s Effect on Organizational Structures

Technology Structures and Social Boundaries Applied to the Natural, Rational, and Open Perspectives

From an organizational theory perspective, technology refers to the nature of work being carried out in an organization and the effects that technology has on the organizational structure. These ideas emerged after the development of the open systems approach to organizations. Several theories emerged in the 1960s that focused on the interdependence of organizational structures and the specific technical environment in which they operated. These theories were built on the contingency perspective, which assumes that the organizational structure depends on the nature of the environment in which it operates (Scott & Davis, 2007).

Technology refers to the work performed by a particular organization. It includes equipment, workers’ skills and knowledge, and the object on which the work is performed. It is the physical, intellectual, and knowledge processes through which material inputs are converted to outputs (Scott & Davis, 2007). Orlikowski’s theoretical model of technology shows that technology has three different effects on organizations: the intended and unintended effects, the direct and indirect effects, and the reconstitution in use effects. Reconstitution in use refers to when organizational participants reconstitute the technology in new ways. (Stroud & Weinel, 2020).

How technology affects structure can be viewed from rational and natural systems perspectives. In the rational approach, the organizational structure is designed specifically to deal with uncertainty, complexity, and interdependent tasks. In general, the organization is designed to buffer the technical core, adjust to the level of uncertainty and complexity, and coordinate the technical interdependence (Scott & Davis, 2007). Organizational theorist Jay Galbraith stated that the “structural mechanisms for coordination must provide the means to handle the amount and richness of information processing required by the uncertainty and equivocality of an organization/team’s task and environment” (Tenkasi, 2018, p. 69). As such, the rational approach provides a number of prescribed organizational structures to deal with the variety of information processing demands. These structures include simple structure, bureaucracy, functional, multidivisional, matrix, adhocracy, or networks (Scott & Davis, 2007).

From a natural system perspective, technology affects structure in a far less prescriptive and formal way (Őnday, 2018). Three major themes relate to the technological effects on natural system structures. They include the social and cultural factors shaping the relation between technology and structure, the substitution of informal for formal structure, and the importance of tacit knowledge under the control of participants versus the prescriptive performance programs designed by management (Scott & Davis, 2007). Natural systems help explain how similar technologies applied in various cultures have radically different effects on the structure of the organization. For example, German firms have a higher level of worker expertise, flexibility, and autonomy than French firms (Scott & Davis, 2007).

The natural system perspective also helps explain technology’s impact on organizational structure with the concept of strategic choice. In natural systems, strategic choice means that every new technology will create various adaptive strategies and responses by participants. Actors inside and outside the organization will create divergent perspectives and interests as a result of strategic choice (Scott & Davis, 2007). In the 1990s, for example, the use of increasingly powerful information technology in companies caused significant structural changes as participants made strategic choices to exploit new opportunities (vom Brocke et al., 2021).

Natural system theorists further acknowledge the importance of the tacit knowledge of workers in the organization. While rational system theorists emphasize the importance of detailed work requirements developed by engineers and technical staff to deal with technology, natural proponents point more towards the ingenuity of workers as they gain knowledge through experimental learning. Scott and Davis (2007) say that “much of the knowledge on which the organization relies is contained in the skills and tacit knowledge of its workforce” (p. 146). This skill base is the true DNA of the organization.

Scott and Davis (2007) provide an important reminder that organizations are not just technical systems, they are human and social systems, and social boundaries exist. These boundaries represent the edge of the organization, and organizational theorists concern themselves with the criteria organizations use to determine whom they will admit or reject based on specific characteristics. Jæger and Pedersen (2020) say that “social boundaries bind actors together in mutual relationships” (p. 4). Social boundaries exist in open systems, acting more like sieves than shells. Understanding social boundaries provides a foundation for understanding recruitment criteria and the division of labor within the organization.

From a rational perspective, boundaries contribute to organizational rationality when it comes to recruitment. Weber referred to it as the rational-legal systems that isolate an organization from its social context. He felt that, once recruited, participants should consider their role in the organization as their primary occupation (Scott & Davis, 2007). On the other hand, natural systems analysts recognize that organizational participation is just one of the many roles a participant plays. They acknowledge that some of the participant’s skills and abilities come from outside the organization. These skills are essentially imported in. They also recognize that a participant’s extra-organizational relationships can create value for the organization (Scott & Davis, 2007).

The concept of division of labor traces its roots to Adam Smith. This rational approach to labor relies on the concept of dividing work into a number of highly specified work steps as a means to gain productivity. Scott and Davis (2007) say that “division of labor supports the application of technology and rationalized procedures to work, increases the scale of work organizations and their markets, and gives rise to managerial hierarchy” (p. 160). The challenge is that this rational approach to labor creates significant issues for participants.

Technology Structures and Organizational Boundary Areas that Create Issues for Participants

Technology structures can provide issues for participants, especially as the levels of uncertainty, complexity, and the need for interdependent tasks continue to rise. In the past, for example, professionals like doctors, lawyers, teachers, accountants, and scientists worked independently and had their own separate practices. Today, with the increase in complexity and the need for interdependent tasks, most professionals are employees in larger organizations. There is also a rise in heteronomous organizational structures where professional employees are subordinated to an administrative framework, and their autonomy is relatively small (Scott & Davis, 2007).

The digital revolution has also affected participants in unprecedented ways. The falling cost of digital information storage, processing, and communication has increased the scale, scope, and complexity of opportunities organizations can exploit (Baum & Haveman, 2020). Davis and DeWitt (2022) say that this has changed how companies “raise capital, engage labor, acquire inputs, distribute to customers, and organize their internal processes” (p. 861). Companies today look entirely different from just thirty years ago. Many do not even have physical locations with employees doing observable tasks, and most have eliminated, automated, or outsourced manual processes (Davis & DeWitt, 2022). In general, organizations have fewer participants and are more physically dispersed and digitally connected than ever before.

From an organizational boundary perspective, the three types of issues for participants include alienation, inequity, and insecurity. Alienation is something Marx addressed. Arenas (2022) says that “Marx refers to the process in which the exchange of labor power and products occurs as something “alien and objective” to the workers, involving their subordination to relations that exist independently of them” (p. 393). Participants in a rational division of labor system are alienated from both the product of their labor and the process of production. This alienation comes in six varieties, powerlessness, meaninglessness, normlessness, cultural estrangement, self-estrangement, and social isolation (Scott & Davis, 2007).

The division of labor also creates inequity in organizations over time. For example, the earnings gap between lower and higher ranks of employees has steadily increased since 1970. According to Uygur (2019), CEOs earned 30 times their workers’ compensation in 1978, and that ratio had increased to more than 300 as of 2014. The rise in compensation has not resulted in a corresponding rise in company performance either. In recent years, there have also been significant reductions in regular, normally-secure positions at companies, with many of those jobs replaced by part-time, temporary, or low-wage employees. The result leaves participants feeling disillusioned by the promise of more efficient and effective organizations (Scott & Davis, 2007).

Participants also have high levels of insecurity because of the apparent termination of the “implicit contract” over the past several decades. More and more employees feel they can no longer expect long-term employment from companies. Downsizing has become increasingly common, and positions that formerly carried the greatest safeguards are being eliminated. Additionally, companies have been moving more towards vertical disintegration by outsourcing many of their processes to outside companies, some of which are in low-cost countries (Scott & Davis, 2007). Companies in Western industrial nations now focus more on design and marketing. They are increasingly reducing their employee base and outsourcing their production, customer service, and even R&D to low-cost countries (Baum & Haveman, 2020).

Personal Perspectives

Technological and social boundary changes over the past decade have created the most significant impact on organizational structures since the development of organizational theory. Today’s companies look nothing like their predecessors. They are something new entirely. God told the Israelites through the prophet Isaiah that they would also see something new. In Isaiah 43:18-19, He says, “Forget the former things; do not dwell on the past. See, I am doing a new thing! Now it springs up; do you not perceive it? I am making a way in the wilderness and streams in the wasteland” (New International Version, 1978/2011). Isaiah was providing “messianic” prophecies to the Israelites about the coming Savior, Jesus, who would fulfill the law.

In many ways, organizational scholars will need to forget the former things as well when developing new organizational theories. Organizational theorist Jay Galbraith says that “innovations often happen in organizations first, then the scholar comes in and gives it theoretical meaning.” (Tenkasi, 2018, p. 69). Innovations have clearly been leading new theory development with the organizational shifts that are happening now in businesses. Roth (2021) says that the world is undergoing the most significant structural revolution in business and society since the end of World War II. He says there will be profound implications for organizational theory. Baum and Haveman (2020) agree and say that we are entering “a brave new world” with the emergence of organizational structures we have never seen before (p. 2020). Roth (2021) says that the “new normal” is so different that scholars need to “reassess the validity of theories that might be outdated now” (p. 539).

Technology, innovation, and globalization have permanently altered organizational structures in the past decade. These trends have given rise to new terms like financializationnikeficationuberizationamazonification (Davis & DeWitt, 2021), and pop-up stores (Betta, 2019). A decade ago, the top ten companies in the United States would top the list of revenues, number of employees, and market capitalization. In 2021, only Walmart and Amazon appeared on all three lists (Davis & DeWitt, 2022). Today’s companies look nothing like their predecessors. For example, there has been a rise in companies that do not produce products or services. Their model connects private sellers and buyers like Airbnb, Turo, Etsy, Udemy, Gumroad, and eBay. Similarly, there is a rise in media companies that produce no content. Their model is to connect private content creators and consumers like YouTube, Vimeo, Twitter, and Instagram.

There is also an intense drive for innovation that Betta (2019) says has created a phenomenon called “neocharisma.” This concept is where every individual thinks of themselves as creative and innovative. In the past, large corporations were the center of innovation and creativity. Now with technology, any individual can be an innovator. Technology has removed the gatekeepers. Anyone with a computer, cellphone, and microphone can be an author with self-publishing on KDP, a radio personality with podcasting on Spotify, a musician with Soundcloud, a television star on YouTube, a distributor with drop-shipping on Amazon, or a celebrity with TikTok. One person with technology today can make more impact in the world than entire companies in the 1950s. This trend will likely accelerate with the introduction of artificial intelligence (AI) over the past two years. It is undoubtedly “a brave new world.” The emergence of new, unique, and compelling organizational structures as a result of technology shifts will keep organizational theorists busy for the foreseeable future.


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Note: This paper was written as part of my requirements for a Doctorate in Strategic Leadership at Liberty University. I’m sharing this here for those who may be interested in some of the theories of leadership. Let me know if you have any questions.


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