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Research organizations state that societal learning plays a significant role in enhancing an organization’s performance. Literature has shown that the influence of an organization’s internal framework is minimal when it comes to producing distinctions on the learning levels.
Vertical integration is a structural feature that leads to interdependence (Sorenson, 2000). The class objective of this paper is to assess the level of which interdependence and in specific vertical integration influences organizational learning. Another class objective that will be discussed in this paper is whether vertical integration hinders learning by doing. The last class objective is whether vertically integrated corporations gain less from experience in production than non- integrated organizations in steady surroundings.
Vertical integration strictly restricts a corporation’s capacity to learn through doing. This is because reasonable managers find operation optimizations intricate especially when choosing on highly inter- reliant options. Integration can smooth the progress of learning by doing through cushioning activities within the organization.
Firms improve in production by achieving experience, that is, they learn new things by doing. There is a positive association linking working experience and staff performance. Organizations, however, undeniably differ in their capacities both to gain knowledge internally and to learn from the actions of others (Sorenson, 2000).
Integration brings about interdependence in corporations. Vertical integration slows down an organizations growth rate by reducing its baseline volume from which the organizations growth occurs. Integrated organizations can thus be disadvantaged in comparison to their less integrated competitors. Research has further shown that vertical integration may impair with other learning types in an organization. These include the expansion of vibrant routines and the incorporation of knowledge established outside the organization (Sorenson, 2000).
Vertical integration also restricts the probability of learning from other people. An integrated firm has less contact points with the exterior surrounding. While distributors might beneficially dispense knowledge across the competing manufacturers, integrated firms bar this option by not associating with suppliers.
Vertical integration restricts the probability of learning from other people through the fact that even when this firms do gain knowledge from other suppliers, they may find it hard to incorporate that knowledge into the organizations’ particular production procedures they have established. Integrated firms thus undergo problems of learning disabilities besides numerous dimensions (Argote, 1999).
The above results do not, however, mean that organizations should not vertically integrate. As anticipated, vertically integrated organizations essentially learn more efficiently than their less inter- reliant competitors in unstable surroundings. Organizations may opt to integrate due to interdependence in their innovative design architecture.
Integrated organizations that thrive well will gain from distributors deciding to start producing the particular constituents that they want. Victorious firms can thus disintegrate. Success augments the level of vertical integration remarkably (Argote, 1999).
Modularization in the computer business elucidates changes in the worth of vertical integration with time. As the accessibility of standard constituents increases, the benefit of internal production reduces resulting to an attrition of vertical integration benefits as the corporation matures. Regional distinctions might create the vertical integration outcomes (Argote, 1999).
Organizations suffer from trade- offs especially when selecting the most favorable organizational framework to smooth the progress of learning. In particular, firms that vertically integrate into constituent production gain less through learning by action compared to those firms that acquire constituents from external distributors. It is, therefore, evident that though integration impairs learning through doing, this only affects the corporation’s performance under constant environments.
Argote, L. (1999). Organizational Learning: Creating, Retaining, and Transferring Knowledge. Kluwer: Boston.
Sorenson, O. (2000). Letting the market work for you: An evolutionary perspective on product strategy. Strategic Management J. 21, 277–292.