Discussion and conclusion
According to Reed and DeFillippi (1990: 91), “Complexity results from the relationship between skills, and between skills and assets. To suggest that complexity itself is a direct source of advantage would be misleading. However, the way in which the firm combines its skills and resources can be a source of advantage.” In this article, we have focused on the specific contingencies that can explain firm performance as a result of increasing complexity. Much management research has tended to treat complexity as a one-dimensional construct associated with the level of interdependency between elements of a system e which may lead to negative consequences such as inefficiencies, inertia and lack of response capacity (Park and Ungson, 2001; Robson et al., 2008), but also potentially generate sources of competitive advantage and revenue generation (Lippman and Rumelt, 1982; Nayyar, 1993). Yet, the effects of complexity on performance often remain ambivalent (Houchin and MacLean, 2005).
To get a clearer understanding, we distinguished here between task and configuration complexity and their specific effects on firm performance. We argue and show empirically that configuration complexity negatively affects profit margins, whereas task complexity has a positive effect. Coordination costs are at the core of understanding these different effects. While the emergence of coordination costs is well-understood in the literature (Galbraith, 1973; Thompson, 1967; Zhou, 2011), we add to this debate that the degree to which focal firms need to ‘bear’ such costs may depend on where complexity arises and how it is moderated by other factors. In the case of configuration complexity, which arises from expanding operations across locations, firms typically need to bear the full costs of coordinating these operations. Such costs may be reduced, however, when processes are highly commoditized. By comparison, in the case of task complexity, costs of coordination are distributed among those parties involved in either requesting or performing a particular task.
