organizational boundaries: definitions, functions, and properties

Organizational Boundaries: Definitions, Functions, and Properties

Christine Oliver York University

Abstract This paper reviews current definitwns of organuatwnal boundaries, examines the different functions of boundaries that are implied by these definitions, and identifies three boundary properties - permeability, stability, and veridicality - that are differentially affected by boundary functwns mid are critical in effective organuation-environment relatwns. Contrary to current assumptions in the organization theory literature, the paper proposes that boundary closure rather than openness to the environment, boundary change rather than stability in organization-environment relatwns) andboundary &tortion rather than veridicality in information exchanges with the environment, may be strategically instrumental to organua- tional success.

R h m C Cet article porte sur lesfronti2res &s organisations. Les fqons courantes de aZfmir les frontidres organisatwnnelks sont revues et leurs implications respectives sur les r6les & celles-ci sont analyskes. Trois caractkrktiques &s frontidres organbatwnnelles jugkes importantes pour ktablir des relations uorganisation-environnementw efficaces sont ensuite identifikes: leur permkabilitk) leur stabilitk et leur prkcision. Contrairement d ce qui est couramment vkhiculkpar les thkories des organisations, il est propost que les kcchanges d’informations avec 1 ’environnementpeuvent t9trestrattgiquement importantes au succbs des entreprises lorsque les frontibres organbationnelles sont ( I ) fermdes plut8t qu ’ouvertes d l’environnement; (2) changeantes plut8t que stables et (3) floues plut8t que pr6cises.

Organizational boundaries describe the intersection of the organization and the environment. An understand- ing of organizational boundaries is critical to an accurate theoretical analysis of organization-environment relations because lhe concept of boundaries prescribes our definitions of what constitutes an organization or an environment (Starbuck, 1976). Implicit boundary definitions also underpin different theories’ assumptions of how organizations and environments are managed and interrelated.

The purpose of this paper is lo examine three core properties of boundaries that are affected by a boundary’s function - permeability, stability, and veridicality. These boundary properties, respectively, define the degree of organizational openness to the environment, the degree of organizational stability in relations with the environment, and the degree of information accuracy in organization- environment relations. These three features of organization-environment relations have been predominantly por-

Address all correspondence toChristineOliver, Faculty of Administrative Studies, York University, 4700 Keele Street, North York, ON, Canada, M3J 1P3.

trayed in the organization theory literature as advantageous outcomes of strategic action or decision-making (Law- rence & Lorsch, 1967; Pfeffer & Salancik, 1978; Scott, 1987; Thompson, 1%7). In contra$t, this paper suggests that these features of organization-environment relations do not always contribute to organizational effectiveness.

This paper argues that the appropriateness of openness, slability, and information accuracy in boundary rela- lions between an organization and its environment will dependlargely on the functions that organizationalbounda- ries are intended to serve for any particular organization. For reasons that will be explained, organizational actions intended to seal off the organization from the environment, to destabilize organization-environment relations, or to distort information exchanges with the environment may be strategically advantageous, depending, for example, on the organization’s need to buffer itself from external intrusions (Meyer & Rowan, 1977), to shape its external image, or to increase internal consensus among its members. This paper attempts to identify the strategic advantages of both high and low levels of boundary permeability, stability,

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OROANIZATIONAL BOUNDARI ES... OLIVER

and veridicality in an effort to illuminate the potential contribution of these boundary properties to organizational effectiveness.

The paper identifies fivealternative conceptualizations or definitions of organizational boundaries in the current organization theory literature. Based on these different conceptualizations, the paper begins by addressing the following questions: What different purposes or functions do boundaries serve for organizations? What underlying organizational motives prompt boundary management across this range of functions? What aspect of the environment do different boundaries functions focus on? What contextual and organizational factors determine the likelihood that these various functions will be served? From an examinationof the factors that determine alternative boundary functions, the paper identifies the variation in boundary properties that these boundary functions create and the resulting strategic advantages associated with these boundary properties. The paper concludes with a discussion of the implications of these properties for future theory and research on organizational boundaries.

Alternative Boundary Definitions and Functions

Table 1 compares the alternative conceptualizations of boundary in the current literature across six determinants. These dimensions are the distinguishing features of boundaries that describe how they are defined, the purposes they serve, the organizational motives for managing them, and their causes or determinants. These aspects or dimensions of boundaries, elaborated below, correspond to the sixdimensions outlined inTable 1: definingcharacteri- zation, functions, motives of boundary management, relevant environment, contextual determinants, and organiza tional determinants.

Membership

Traditional conceptions of the organization-environment interface define boundary as membership (Aldrich, 1979).

A minimal defining characteristic of a formal organization is the distinction between members and non-members, with an organization existing to the extent that some persons are admitted while others are excluded, thus allow- ing anobserver to draw a boundary around an organization. (Aldrich & Herker, 1977, p. 217).

Boundary, from this perspective, is the distinction between individual actors’ inclusion in versus exclusion from a given focal organization. The determination of an organization’s boundary is dependent on the organizational selection and evaluative criteria that are used for

admitting or rejecting individuals and on the degree of authority that an organization exercises over the entrance and exit of individuals.

Boundaries serve a jurisdictional purpose to the extent that anorganization is motivated to specify orstrengthenits formal authority over members (Aldrich, 1979). An organization, for example, that initiates the use of a stringent technique for screening applicants and periodically retesting current employees (e.g., a drug test or competency exami- nation) reaffirms its authority over member entry and exit and its control over existing members. The existence of a definable boundary around an organization also tends to enhance the purpose of its actors. Boundaries contain goals, standards, rules, and expectations within its perim- eter and reinforce perceptions of the organization as an instrument of collective purpose. Perceptions of “insider” versus “outsider” or “us” against “them” (e.g., a dominant competitor) also inflate the boundary’s symbolic signifi- cance, which, in turn, serves to increase the perceivedvalue of member participation and to reaffirm shared beliefs of superiority or control relative to non-members (Aldrich, 1979). Organizations build internal elitism and cohesiveness, for example, by enforcing restrictive entry into the organization, attributing inferiority to non-members, or encouraging members to focus collectively onoutcompeting an external rival. From the perspective of boundary as membership, therefore, an organization’s motives inbound- ary management are authority over its members; a boundary functions to delimit the social order of the participants it surrounds and to prescribe the normative or authoritative standards for inclusion in the organization.

The ambiguity of organizational inclusion plagues definitions of boundaries as membership. High rates of turnover, member sharing or exchange, and the relative ease with which individuals may enter and exit organizations canblur organizational boundaries (McPherson, 1983). Definitions of boundaries as membership are further con- founded by distinctions between full- and part-time employees, and active versus inactive involvement in volun- tary organizations (Freeman, 1978). Individual membership in organizations is also partial for two additional reasons. First, an individual may have multiple or overlap- ping memberships in several organizations (McPherson, 1983); second, organizations are likely to exercise only partial control over members and their entrance and exit (Aldrich, 1971; Tannenbaum, 1968).

The definition of boundary as membership also implies a focus on the human resource aspect of the environment. Organizations, from this perspective,areconstrained by the realities of labour mobility and limitations on their discretion to exercise control over members’ activities, as well as the information that members share with their environment (McPherson, 1983). When boundaries serve a jurisdictional or purpose-building function, the attempt

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Tabl

e 1

Boun

dary

Fun

ction

s and

Det

erm

inan

ts

Boun

dary

di

men

sion

s A

ltern

ativ

e boundary c

once

ptua

lizat

ions

Mem

bers

hip

Rol

e set

Sp

here

of influence

Transactions c

ost

Inst

itutio

nal f

ilter

di

chot

omy

Def

inin

g In

divi

dual

cons

titut

ents

R

oles

and

act

iviti

es

Buf

fers

and

brid

ges

Mar

ket-h

iera

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In

stitu

tiona

l ch

arac

terb

atio

n po

lariz

atio

n pe

netra

bilit

y

Func

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Ju

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n and

M

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ring a

nd

Prot

ectio

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A

ssig

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t of

Isom

orph

ism an

d pu

rpos

e-bu

ildin

g boundary s

pann

ing

Conn

ectio

n transactions

imag

e tra

nsm

issi

on

Mot

ives

of

Aut

horit

y ov

er

Info

rmat

ion a

cqui

sitio

n A

uton

omy

and

cont

rol

Effic

ienc

y and

cost

kgiti

mac

y an

d cr

edib

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W

bo

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ry m

anag

emen

t m

embe

rshi

p re

duct

ion

Rel

evan

t env

ironm

ent

Hum

an re

sour

ce

Info

rmat

ion

Task

M

arke

t so

cial

Con

text

ual

Thre

ats t

o m

embe

rshi

p In

form

atio

n equ

ivoc

ality

En

viro

nmen

tal

Mar

ket u

ncer

tain

ty an

d In

stitu

tiona

l pr

essu

res

for

dete

rmin

ants

control

and

com

plex

ity

unce

rtain

ty an

d sm

all n

umbe

rs

Con

form

ity

Conflict

barg

aini

ng

Org

aniz

atio

nal

High em

ploy

ee

Dec

isio

n-m

akin

g R

esou

rce necessity

Bounded

ratio

nalit

y In

stitu

tiona

l sta

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g de

term

inan

ts

turn

over

un

certa

inty

an

d op

portu

nism

c

c 4

ORGANIZATIONAL BOUNDARIES.. . OLIVER

of the organization is to stabilize and solidify its boundaries in order to seal off the organization from unwelcome outsiders (e.g., marginal applicants) or to improve the quality or loyalty of its personnel (e.g., raising entrance requirements, protecting new product secrets) (Aldrich, 1979). Boundaries are especially likely to serve these functions when current employee turnover is high and when there are external threats to the organization’s control over its membership or proprietary knowledge, including, for example, industrial espionage in new product or technological development, threats of unionization, or perceived government interference in the organization’s selection, promotion, or termination decisions. Under these conditions, the organization is motivated to re-establish control over its members’ activities, the procedures and conditions of member entry and exit, and the processes that will contribute to member retention, commitment, and loyalty.

Role Set

Incontrast to membership definitions, the literature on boundary spanning defines boundary in terms of a set of roles (Adams, 1%7,1980; Katz & Kahn, 1978; Keller & Holland, 1975; Leifer & Delbecq, 1978; Miles, 1980; Organ, 1971; Tushman, 1977). Roles represent the activities or functions of members or agents of an organization that serve to relate the organization to its environment. Boundary roles are defined as those occupied by individuals who operate at the periphery of the organization. These roles are often associated with such occupational positions as salespersons, public relations personnel, and purchasing agents.

Keller and Holland (1975, p. 388) define boundary roles as those that are “vital to the effective monitoring of the environment and to the transfer of technology and information across boundaries.” Although boundary spanners have been assigned a variety of labels in the literature to represent the different roles that they typically occupy (linking pins, gatekeepers, for example), boundary as role set places particular emphasis on the activities pertaining to information acquisition, processing, and exchange (Leifer & Delbecq, 1978; Leifer & Huber, 1977). Role set conceptions of organizational boundaries emphasize the activities of boundary role incumbents in regulating and controlling the input and outflow of information to and from the organization. This perspective draws attention to the role of information processing in boundary spanning and to the functionofboundary spanners as gatekeepingregulatorsof uncertainty emerging from the informational component of the environment (Leifer & Huber, 1977). Boundary spanners serve the purpose of monitoring and scanning the informational environment, defending the organization against information overload and influence, filtering and

facilitating the flow of information in and out of the organization, and directing information to relevant internal and external constituents.

From a role set perspective, the motives of boundary management reflect the necessity and desire for organizations to acquire accurate information from the environment in order to achieve organizational goals. Considerable theory and research suggest that the functions of monitoring and boundary spanning will be particularly necessary when information equivocality and complexity in the organization’s environment are high (Aldrich, 1979; Scott, 1987; Weick, 1979). Under these conditions, the organization possesses a greater need to allocate formal boundary roles for purposes of acquiring, filtering and disseminating the information relevant to the organization’s tasks and purposes (Aldrich, 1979). The primary organizational de- terminant of monitoring and boundary spanning activity is decision-making uncertainty, which tends to be higher when task predictability and routineness are low, existing intraorganizational information is limited, and goal ambiguity is high (Leifer & Delbecq, 1978).

Sphere of Influence

Resource dependence theory argues that the key to organizational survival is the acquisition and control of resources (Pfeffer & Salancik, 1978). Organizations are environmentally constrained coalitions that interact inter- dependently with other organizations and are driven to reduce uncertainty and dependence. Pfeffer and Salancik . (1978,~. 37) define boundary in terms of the organization’s relative sphere of influence.

The organization’s boundary.. .can be defined in terms of its influence over activitiescompared to the influence ofother social actorsover thesameactivitiesofthesame participants. When the focal organization’s influence is greatest, we can say that those activities are. included within its boundaries.

In contrast to membership and role set definitions of boundary, the authors emphasize that it is interests and behaviours, not individuals, that are organized into structures. Since social actors are typically a part of several structures, the inclusion of any given individual in a single organization is only partial. Boundary, then, is defined as control or influence over action, relative to the control of other social entities over the same action. This perspective also pays particular attention to the task environment of the organization.

The resource dependence approach to defining boundaries as sphere of influence is consistent with decision models that define organizations as coalitions of shifting and divergent interests (Cyert & March, 1%3; March,

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1%2,1978; March & Olsen, 1986). From this perspective, organizations are viewed not as unitary hierarchies of individuals in pursuit of common and coherent objectives but as arenas of conflict, instability, and change in which individual actors or groups negotiate on the outcomes of divergent goals, choices, and preferences. At any given point in time, an organization’s boundary is the end result of mediation processes among dominant coalitions that jostle for the imposition of their own focal interests on organizational goals and activities. These diverse interests and preferences include the cross-boundary influences of internal and external constituents who compete for the pursuit and control of organizational activities that will serve their own interests and agendas. Also central to sphere of influence conceptions of boundaries is the notion that environments are negotiated (Cyert & March, 1963; Pfeffer & Salancik 1978). Organization-environment interaction is typified by organizational attempts to control the environment, to reduce the uncertainties that the task environment generates, and to coordinate the respective interests of various social actors with whom the organization interacts to acquire resources.

Boundaries as sphere of influence are defined in terms of both their buffering and bridging characteristics, and accordingly serve both a protective and connective function. Organizational boundaries exist to protect the organization from undesirable extrasystemic intrusion, loss of organizational autonomy, and exposure to excessive environmental influence and uncertainty. Boundaries are designed to buffer the central work processes and core technology of the organization from disturbances arising from the task environment, and strategies such as coding, stockpiling, levelling, and forecasting are argued to amplify the protective function of boundaries (Scott, 1987).

Strategies to buffer organizations from environmental disturbances have been contrasted with alternate bridging strategies (Fennel1 & Alexander, 1987; Pfeffer & Salancik, 1978; Scott, 1987; Thompson, 1%7) that create linkages or connections to the environment in response to problems of organizational interdependence and environmental uncertainty. These linkages appear in many forms: joint ventures, written contracts, social networks, trade associa- tions, councils, interagency consortiums, or board interlocks, for example (Oliver, 1990). The establishment of linkages is argued to be prompted by the desire to obtain access to and control over critical resources, to achieve stability in interorganizational relations, and to exert domi- nance or social control over the parties with whom it is necessary to establish linkages for purposes of resource acquisition (Oliver, 1990). Therefore, in contrast to the consensus-building and information-seeking functions highlighted by membership and role set definitions, sphere of influence conceptions of boundary emphasize the controlling aspect of organization-environment interactions,

the multiple and conflicting interests that these interactions constitute, and organizational efforts to maximize decision-making autonomy in the face of environmental de- pendencies and constraints. The need for organizational boundaries to serve as bridges and buffers in the context of task environment constraints is a consequence of both resource necessity, that is, the organizational need to acquire critical resources, and environmental uncertainty, which prompts organizations to stabilize critical exchanges and protect itself from excessive intervention in ongoing internal task activities.

Transaction Cost Dichotomy

Transaction cost theory (Williamson, 1975, 1985) suggests that an organization’s boundary is defined by a polarized distinction between hierarchies and markets. The motives of boundary management from this perspective are to maximize efficiency and reduce transaction costs. The transaction cost approach argues that relative efficiency in hierarchies (i.e., organizations) versus markets drives the exchange of goods or services. Organizational determinants, including opportunism and bounded rationality, coupled with the level of uncertainty and number of buyers or suppliers in the organization’s market context, are predicted to determine the cost of transactions and their assignment to either hierarchies or markets (Williamson, 1975, 1985). This framework assumes that the boundary between an organization and its market is distinct: Trans- actions are proposed to occur either internally or through arms lengthmarkets. This conception of boundary does not address cross-organization arrangements that blur organizational boundaries (Powell, 1990), including quasi-integration (Porter, 1980), partial firm ownership of suppliers or distributors, and cross-boundary relations between com- petitors (horizontal joint ventures, trade association relations, for example). In transaction cost theory terms, organizations confront transaction decisions that reduce to two alternatives exclusively: the assignment of transactions to either internal or market control.

The choice between producing a product or service internally or contracting out for the purchase of such services is one example of this distinction that depends upon the relative cost of these alternatives. All transaction cost considerations reduce to choice of locations for transactions, withinversus beyond the organizational boundary.

“inakeor buy” decisions are tantamount to defining the technical boundaries of the organization. To “make” goodsorservicesistobring theseactivitieswithin your own boundaries; to“buy” them is to relinquish them to the environment. As we would expect, Williamson predicts that firms will set their boundaries in such a manner as to minimize their transaction axits. (Scott, 1987, p. 1983)

5


Market to hierarchy shifts, such as vertical integration, extend the organization’s boundary and pull a part of the environment within the organization. Hierarchy to market shifts (divestitures, for example) contract the organization’s boundary. Boundaries, accordingly, serve as the point at which costs are compared in selecting between the two modes of transactions.

Since the boundary of the organization represents a clear distinction between a limit of only two alternative means of conducting these transactions - arms length markets and organizational governance - decisions surrounding transactions reduce to a determination of the point at which transaction costs rise sufficiently to warrant movement of the transaction within the organization’s boundary. This definitive polarization between organizations and markets from a transaction cost perspective is also made more apparent by recent criticisms that this dichotomy makes the boundary between an organization anda market unrealistically sharp. Several theorists (Jarillo, 1988; Powell, 1990; Thorelli, 1986) have elaborated the nature of organizational network arrangements, specifi- cally the bridging and connective arrangements noted earlier, in order to illustrate the more complex realities of interaction between organizations and environments that are neglected by transaction cost theorists, and that represent the mid-range of strategic activities that occur between the polar extremes of market and hierarchy alternatives. Other theorists have also argued that cost reduction as the sole motivation in boundary setting and movement oversimplifies the reasons that organizations enter into transactions (Granovetter, 1985; Perrow, 1986).

Institutional Filter

Institutional theory (DiMaggio & Powell, 1983; Meyer & Rowan, 1977; Rowan, 1982) characterizes the environment as a stock of social knowledge incorporating institutionalized rules, norms, and myths. From this perspective, organizations are constrained by ideas external to them (Hinings & Greenwood, 1988a). The external social context of organizations is argued to have a profound influence on organizational structures and processes. Or- ganizations are driven to import the rules and cultural norms of the institutionalized environment in order to enhance their legitimacy and fortify their claims or rights to provide specific products and services (Baum & Oliver, 1991). In contrast to membership and transaction cost conceptualizations of boundary, the boundary of an organization, from an institutional perspective, does not represent a definitive point of separation between organizations and their environment. Instead, the organization’s boundary is implicitly viewed as a highly penetrable filter through which social values and institutional rules are persistently transmitted. Meyerand Rowan(1977,p. 346), forexample,

note that “according to the institutional conception.. .organizations tend to disappear as distinct and bounded units.” As entities in pursuit of conformity with the prevailing external culture, organizations, over time, are assumed to become partially indistinguishable from the larger environment within which they reside.

Institutional theory characterizes boundaries as filters through which the external culture and institutional rules, norms, and values of the environment pass with relative ease, to impinge on the organization’s structure and processes. The interpenetrability of the organization and its social environment facilitates organizational conformity or isomorphism with the institutional environment (DiMaggio & Powell, 1983; Oliver, 1988). The institutional constituents of the environment, including the state, the community, and the force of public opinion, represent the external requirements to which organizations must conform in order to achieve legitimacy and social validity (Zucker, 1987). For an organization to justify its actions and maintain external credibility, it must establish an appearance of congruence between the social values implied by its activities and the institutional norms and requirements of the larger environment within which it resides (Dowling & Pfeffer, 1975). For this reason, organizations in highly institutionalized environments also attempt to transmit an image of legitimacy and social conformity with external rules and regulations. Organizations also commonly establish legitimating linkages with the institutional environment in order to enhance their image and profile or to demonstrate their conformity with public policies and expectations (Oliver, 1990,1991; Wiewel & Hunter, 1985).

External pressure for conformity is the dominant fac- tor shaping an organization’s efforts to demonstrate its legitimacy and isomorphism with institutional rules and expectations (DiMaggio & Powell, 1983; Meyer & Rowan, 1977; Zucker, 1987). According to Scott and Meyer (1983, p. 140), “institutional sectors are characterized by the elaboration of rules and requirements to which individual organizations must conform if they are to receive support and legitimacy from the environment.” Since an organization’s viability, from this perspective, is argued to be a function of conformity to given institutional specifica- tions, maintaining open, penetrable boundaries with the institutional environment is predicted to enhance an organization’s survival prospects (Baum & Oliver, 1991; Meyer & Rowan, 1977). The need to demonstrate conformity or establish connections to the institutional environment will also depend on the organization’s institutional standing. Particularly when organizations are recent entrants in a specific sector or industry, these organizations will possess neither the public visibility nor legitimacy that years of experience ina Geld tends to provide (Stinchcombe, 1965; Wiewel & Hunter, 1985). Under these circum-

6


stances, organizations will be especially likely to seek legitimating linkages that can raise their profile and social acceptance in the community or industry they occupy.

To summarize, the range of identified boundary functions is a response to differing constraints imposed by different components of an organization’s environment. Membership definitions tend to focus on the human resource environment; organizations are constrained by the limits to both their choice of members from the environmental pool and their discretion to exercise control over member inclusion, entrance, and exit. Role set definitions emphasize the boundary roles that functionally relate the organization to its environment, but focus in particular on the informational aspect of the environment (information monitors, gatekeepers and scanners, for example). The environment is assumed to impose constraints on the organization’s ability to scan, acquire, and process information, to screen out unwelcome or irrelevant information, and to reduce informational uncertainty and overload. Sphere of influence boundary conceptions tend to focus on the task environment and the constraints that environments impose on organizational decision-making and stability. Organizations, from this perspective, attempt to buffer their internal processes from environmental disturbances or uncertainties and to create bridges to the environment that will stabilize environmental relations. Boundary as transaction cost dichotomy emphasizes the market environment of the organization. From this perspective, the dominant constraints that organizations confront are market uncertainty and the pressures that market competition imposes on organizations to maximize efficiency. Finally, boundaries as institutional filters focus on the social and cultural dimensions of the environment. Organizations are characterized as legitimacy-seeking and as relatively pas- sive recipients of institutional effects (DiMaggio, 1988; Oliver, 1991); the institutional environment is viewed as a relatively powerful constraint on the organization’s ability to exercise discretion over its processes and activities. From this perspective, organizations in highly institutionalized environments tend inevitably toward isomorphism with the institutional environment (DiMaggio & Powell, 1983; Oliver, 1988) and their survival is highly dependent on external legitimation and social acceptability (Baum & Oliver, 1991; Meyer, Scott, & Deal, 1981).

Boundary Properties: Definitions and Current Assumptions

All of the foregoing boundary functions will exert an important influence on three aspects of the organization- environment interface that have occupied a central role in organization theory and analysis: an organization’s openness to the environment, an organization’s degree of stabil-

ity in relations to the environment, and an organization’s accuracy in reading the environment. Three boundary properties- permeability, stability, and veridicality - correspond to these three aspects of organization-environment relations.

Boundary permeability, defined as the degree of organizational openness to the environment (Liefer & Delbecq, 1978), has its roots in classical open systems theory (Bertalanffy, 1%2; Buckley, 1967). Current theory in general assumes that it is both advantageous for organizations to act as open systems (e.g., to procure necessary resources and remain responsive to environmental change) and appropriate for organizational analysts to view them as such (Astley & Fombrun, 1984; Pfeffer & Salancik, 1978; Scott, 1987; Starbuck, 1976; Thompson, 1%7). Boundary stability refers to the ease and frequency with which boundaries can be expanded (e.g., forward and backward integration, internalizing exchange, coopting and absorb- ing external elements) or contracted (e.g., divestiture). Several influential theorists (Pfeffer & Salancik, 1978; Thompson, 1967) place a strategic premium on boundary stability, and on the organization’s fundamental drive to secure stable relations with the environment in order to cope withenvironmental uncertainty and to ensure predictable interorganizational relations with those external constituents who control critical resources. Boundary veridicality is defined as the extent to which information distorts as it crosses the organization boundary. Veridicality refers to the accuracy and veracity of information obtained from the environment or transmitted to it. A broad literature presupposes that accuracy in environmental scanning is strategically mandatory althoughinevitably unachievable due to a variety of distortions, enactments, political interests, and limits to information processing that impacts information content as it is filtered through the organization’s boundary (Scott, 1987; Tushman, 1977; Weick, 1979). Institutional theory argues that the receipt and absorption of social information (e.g., institutional myths, norms, and values) is both inevitable and advisable, since organizations are assumed to tend inexorably toward isomorphism with their institutional environment (DiMaggio & Powell, 1983; Oliver, 1988) and the absorption and reflection of institutional cues and information is predicted to contribute to organizational success and survival (Meyer & Rowan, 1977; Scott & Meyer, 1983).

To summarize, boundary permeability, stability, and veridicality, defined as openness to the environment, stability in relations with the environment, and information accuracy in exchanges with the environment, have played a central role in the analysis of boundary relations between organizations and environments. High levels of permeability, stability, and veridicality have tended to be viewed as strategically advantageous properties of boundary relations between the organization and its environment.

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Boundary Functions: Resulting Properties and Strategic Advantages

Different boundary functions (legal jurisdiction and purpose-building, monitoring and boundary spanning, protection, connection, transaction assignment, isomorphism and image transmission) will have different effects on permeability, stability, and veridicality, and these properties, in turn, will have important strategic implications for an organization’s effectiveness. It is proposed here that both high and low levels of permeability, stability, and veridicality may be strategically advantageous to organizations, depending on a boundary’s function and the contextual and organizational determinants (elaborated above and summarized in Table 1) that create the need for these boundary functions. For example, if a boundary’s function is to build internal purpose or protect organizations from external intrusions, the effect will be less permeability or openness between the organization and its environment. These lower levels of boundary permeability will be associated withspecific strategic advantages, including greater organizational control, more organizational autonomy, and fewer disturbances to the organization’s technical core.

This suggests that the appropriateness of openness, stability, and information accuracy in organization-environment relations should be evaluated on the basis of the determinants that give rise to the necessity for an organization’s boundary to serve a particular function. Depending on the organizational and contextual factors identified in Table 1 (e.g., high employee turnover, threats to membership control), it may be strategically instrumental for organizations to reduce the permeability of their boundaries, to destabilize their boundaries, or to distort information that crosses their boundaries. An exclusive emphasis on the advantages of openness, stability, and accuracy in boundary relations oversimplifies the range of demands that an organization confronts in each subcomponent of its environment (e.g., human resource, infomation, task, market and institutional subenvironments) and overlooks the need for boundaries to serve different functions in response to these differing demands. Stated differently, boundaries characterized by closure, instability, and distortion may also serve the organization’s interests, depending on the function that an organization’s boundary serves in order to cope with various organizational and environmental constraints.

Below, propositions are elaborated for each boundary function in terms of (a) resulting boundary properties, and (b) the strategic advantages associated with these properties. The former, summarized in Table 2, predicts whether each boundary function will result in high or low levels of permeability, stability, andveridicality. The latter, summarized in Table 3, specifies the organizational advantages of high (or low) levels of permeability, stability, and

veridicality associated with each boundary function. The advantages of high (or low) levels of openness, stability, and accuracy in organization-environment relations are predicted to differ systematically across functions. These propositions suggest that widely varying levels of boundary permeability, stability, and veridicality may be necessary to respond effectively to the demands of different subenvironments, and that effective boundary management is likely to incorporate multiple organizational goals, including greater internal control, information acquisition, organizational autonomy, resource access, efficiency, and social acceptability.

Legal Jurisdiction and Purpose-BuiMing

Proposition 1: Whenboundariesservea legal jurisdiction and purpose-building function, they will be characterized by low permeability, high stability, and low veridicality.

A membership perspective on boundaries emphasizes the legal jurisdiction and purpose-building functions of boundaries. From this perspective, boundary permeability will be low because organizations are viewed“as a bounded network of internal social relations” (Scott, 1987, p. 171) and members are sharply distinguished from non-members or outsiders (Aldrich, 1979, p. 221). As Weber (1947, p. 139)notes,“a.. .relationshipwill.. .becalled ‘closed’against outsiders so far as...p articipation of certain persons is excluded, limited, or subject to conditions.” Recruitment criteria, for example, are an “important mechanism foster- ing insulation of the organization from its social environment” (Scott, 1987, p. 173). To the extent that boundaries serve a jurisdictional or purpose building function, permeability will be low because the organization’s intent is to maximize the separation between insiders and outsiders, to erect barriers against external intrusions (e.g., unions, government intervention) and to seal off the organization against the threat of information leaks or disclosure.

When boundaries serve these functions, they also become stabilized to protect the organization from individuals perceived to be unsuitable or unqualified for membership, and to solidify conditions of entry (Aldrich, 1971; Tannenbaum, 1968). Veridicality or accuracy of information exchange with the environment also tends to be lower. To build purpose or internal cohesiveness, organizations often distort the characteristics of their external rivals or exaggerate distinctions between “us” and “them.” The jurisdictional functions of boundaries also minimize information leaks and exchanges between members and non- members that might disclose organizational secrets (e.g., new product or technological developments) or inauence

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Table 2 Effects of Boundary Functions on Boundary Properties

Boundary properties

Boundary functions

~ ~~ ~

Permeability Stability Veridicality

Legal jurisdiction and purpose-building

Monitoring and boundary -spanning

Protection

Connection

Transaction assignment

Isomorphism and image transmission

LOW

High

LOW

High

High

High

High

LOW

High

High

LOW

LOW

LOW

High

LOW

High

LOW

High

Table 3 Strategic Outcomes of Boundary Properties

Level of boundary property Boundary properties High LOW

Permeability Greater awareness of environmental innovations Greater ease of access to scarce resources More strategic latitude for conducting exchange Greater organizational legitimacy

Greater control over members’ activities

Greater organizational autonomy and commitment

Stability Greater control over organization entry and

Fewer disturbances to the technical core Greater predictability in exchange

Greater flexibility to respond to

Greater organizational efficiency Higher responsiveness to changing

exit environmental changes

institutional demands

Veridicality Greater capacity to learn from and adapt to

Lower environmental uncertainty external information Higher organizational visibility and social

Greater protection of proprietary information the environment and insulation from demotivating

Greater predictability of organizational prokss Srronger justification of internal governance support

mechanisms


members to redirect their energies from organizational goal achievement (Scott, 1987, p. 1975).

Therefore, several strategic advantages are associated with high levels of boundary stability and low levels of permeability and veridicality when boundaries serve a jurisdictional or purpose-building function.

Proposition 1A When a boundary’s function is legal jurisdiction and purpose-building, lower permeability will result in greater control over members’ activities and level of goal commitment.

Proposition 1B: When a boundary’s function is legal jurisdiction and purpose-building, higher stability will result in greater control over organization entry and exit.

Proposition 1 C When a boundary’s function is legal jurisdiction and purpose-building, lower veridicality will result in greater protection of proprietary information and more insulation from demotivating external information.

Under these conditions, boundary closure and stability enhance control over entry (e.g., elite membership criteria, student entrance examinations) and conditions for expul- sion from the organization (Aldrich, 1979, p. 224), which in turn, enhances the organization’s ability to select or retain only those members who adhere to organizational goals. Informationinaccuracies transmitted to the environment may also enhance an organization’s competitive advantage; low boundary veridicality helps the organization, for example, to protect its proprietary information on products, procedures or technology. Overall, the boundary properties of low permeability, high stability, and low veridicality will result in more organizational influence over the activities of its members, the conditions of member entrance and exit, and the type of information that is released from, or permitted to influence, organizational members.

Monitoring and Boundary Spanning

Proposition 2: When boundaries serve a monitoring and boundary spanning €unction, they will be characterized by high permeability, low stability, and high veridicality.

The specific intent of monitoring and boundary spanning activities is to increase openness to the environment (Miles, 1980), to facilitate information exchange across boundaries (Liefer & Huber, 1977), and to reduce the barriers to accurate or veridical information transmission Feller & Holland, 1975). Therefore, boundaries intended to serve these functions will be characterized by high permeability or openness and high veridicality. The more

attention and resources that an organization commits to the boundary functions of environmental monitoring and scanning, the lower the likelihood of distortion as information crosses the organization boundary (Leifer & Delbecq, 1978). Boundary spanning also renders boundaries less rigid and immutable. Boundary role incumbents expand the organization into its environment to explore its uncertainties, to gather external data and to extend their roles in processing information and representing the organization (purchasing agents, marketing representatives, shipping agents, for example) (Aldrich, 1979, p. 253).

Proposition 2 A When a boundary’s function is monitoring and boundary-spanning, higher permeability will result in greater awarenessof environmental innovations.

Proposition 2B: When a boundary’s function is monitoring and boundary-spanning, lower stability will result in greater flexibility to respond toenvironmental changes.

Proposition 2 C When a boundary’s function is monitoring and boundary-spanning, higher veridicality will result in greater capacity to learn from and adapt to the environment.

The strategic advantages of high permeability and veridicality, and low stability in boundary relations with the information environment are significant. Organiza- tions increase their ability to evaluate the amount and sources of support for organizational goals (Aldrich & Herker, 1977) and they become more current on recent trends and technological changes in the environment, with resulting increases in organizational flexibility to respond to changing environmental conditions. These boundary properties also increase the organization’s capacity to learn Erom and adapt to environmental contingencies (Lawrence & Lorsch, 1967; Tushman, 1977). From an open systems perspective, “information acquisition and processing is viewed as an especially critical activity, since an organization’s long-term well-being is dependent on the ability to detect and respond to subtle changes in the environment” (Scott, 1987, p. 321). As noted earlier, these strategic advantages are most likely to be important whendecision- making uncertainty is high (Leifer & Delbecq, 1978) and when the information environment is characterized by instability, complexity, and equivocality (Aldrich, 1979; Scott, 1987; Weick, 1979). Under these conditions, the necessity for boundary spanning and monitoring will be especially intense and the payoffs of these activities, accordingly, will be particularly high.

10 RCSAIClAS, 1p(l), 1-17


f’rotection

Proposition 3 When boundaries serve a protective function, they will becharacterized by low permeability, high stability, and low veridicality.

The protective functionof boundaries is revealed inefforts to buffer the organization from the environment by decoupling internal work processes from external scrutiny or influence (Oliver, 1991; Powell, 1988). Scott (1987, p. 182) describes buffering strategies of an organization as those designed “to amplify its protective boundaries. This argument emphasizes the need to close the system artifi- cially to enhance the possibilities of rational action.”There- fore, boundaries will possess the properties of low permeability and high stability when they serve a protective function. Veridicality will also tend to be lower when a boundary’s purpose is to buffer the organization from task environment influences. Buffering permits organizations to conceal detailed organizational activities (such as class- mom instruction) from external observation and evalua- tion (Meyer & Rowan, 1983; Oliver, 1991). The buffering strategy of coding or classifying inputs is another example of information distortion. As Scott (1987, p. 183) notes, “no set of codes can capture all of the relevant properties of the raw materials; codes always simplify.. .but sometimes in distorting or biasing ways.” Therefore, boundary veridicality will tend to be low when the organization’s boundary serves a protective function.

Proposition 3 A When a boundary’s function is protection, lower permeability will result in greater organizational autonomy.

Proposition 3B: When a boundary’s function is protection, higher stability will result in fewer disturbances to the technical core.

Proposition 3 C When a boundary’s function is protection, lower veridicality will result in greater predictability of organizational processes.

One of the important strategic advantages of boundary protection and buffering is more internal decision-making autonomy and discretion for the organization. A broad literature suggests that organizations are inherently driven to maximize their autonomy and minimize external intervention in decision-making processes (Cook, 1977; Oliver, 1991; Pfeffer & Salancik, 1978; Thompson, 1967; Whetten & Leung, 1979). A related advantage is reduced disturbances to the technical core or central work processes of the organization. Most organizations are highly motivated to achieve internal stability and certainty in order to function efficiently (Thompson, 1%7). Levelling and stockpiling inventories are two examples of buffering strategies that

tend to reduce disturbances to the technical core (Scott, 1987). These activities, in turn, permit greater predictability in carrying out internal functions. Sphere of influence approaches to boundary definition (Pfeffer & Salancik, 1978) propose that such internal predictability is a critical objective of organizations. Accorbingly, lower permeability and veridicality and higher stability in boundary relations will be associated with several relatively crucial consequences for organizations when boundaries serve a protective function, including more decision-making latitude, fewer intrusions to the internal efficiency of the organization’s technical core, and more stability and predictability in conducting the central work activities of the organization.

Connection

Proposition 4: When boundaries serve a connective function, they will be characterized by high permeability, high stability, and high veridicality.

Bridging strategies of boundary management (e.g., joint ventures, board interlocks) serve a connective function (Galaskiewin, 1985; Oliver, 1990). This function will increase boundary permeability because the organization opens its boundary for the specific purpose of establishing sets of exchanges to procure or distribute resources (Pfeffer & Salancik, 1978). Stability also increases because the intent of establishing interorganizational connections is to achieve stability in the flow of resources and information to and from the environment (Leblebici & Salancik, 1982; Pennings, 1981; Pfeffer & Salancik, 1978). Veridicality also tends to rise when boundaries serve a connective function. Interorganizational linkages provide opportunities for participating organizations to acquire and share more information and to enhance interorganizational com- munications (Bazerman &Schoorman, 1983; Provan, 1984).

When boundaries serve a connective function, the advantages of high permeability, stability, and veridicality are significant.

Proposition 4 A When a boundary’s function is connection, higher permeability will result in greater ease of access to scarce resources.

Proposition 4B: When a boundary’s function is connection, higher stability will resuli in greater predictability in exchange.

Proposition 4C: When a boundary’s function is connection, higher veridicality will result in lower environmental uncertainty.

The most evident advantage of higher permeability is resource access. For example, organizations develop joint

11


ventures to gain access to new markets and technologies (Kogut, 1988); firms establish contracts with suppliers and distributors to ensure a reliable flow of critical throughputs (Pfeffer & Salancik, 1978); agencies cultivate linkages to sponsors, such as the United Way, to ensure more stable access to funding (Provan, 1983). Since these connections tend to stabilize organization-environment relations (Pfeffer & Salancik, 1978), the organization also achieves greater predictability in its exchange relations and a more orderly pattern of resource flows and exchanges (Benson, 1975; Oliver, 1990; Pennings, 1981). Higher veridicality, in the form of information exchange between interlocking board members, for example, or pooling knowledge in joint venture formation (Kogut, 1988), also lowers uncertainty in task environment relations. A broad literature supports the notion that boundary connections tend to enhance predictability in exchange and to reduce environmental uncertainty (Aldrich, 1979; Cook, 1977; Pennings, 1981; Pfeffer &Salancik, 1978; Starbuck, 1976; Steams, Hoffman, & Heide, 1987; Thompson, 1967).

Assignment of Transactions

Proposition 5: When boundaries serve a transaction assignment function, they will be characterized by high permeability, low stability, and low veridicality.

The market-hierarchy boundary is argued to represent a polar distinction between two alternative modes of reduc- ing transaction costs. From the perspective of transaction cost theory, the permeability of this boundary between organizations and markets is high, and its stability and veridicality are low. The decision between locating transactions internally or externally (e.g., make versus buy decisions, using in-house staff versus the services of external consultants) is a decision between boundary closure and openness. Boundary permeability is assumed to be high because cross-boundary transactions (between the organization and the market) are proposed as common solutions to the problem of minimizing costs in exchange. Considerable research, for example, has used a transaction cost framework to investigate the factors that promote and constrain open system organization-market exchange (Ar- mour & Teece, 1978; Jones, 1987; Jones & Pustay, 1988; Walker & Weber, 1984).

The stability of an organization’s boundary is also low under these conditions. Given that decisions of boundary expansion or contraction are driven exclusively by efficiency and cost reduction motives, transaction cost theorists assume that boundary shifts are tightly coupled with any changes in, or reassessments of, the relative costs of market versus hierarchy alternatives. Whether the organization is expanding its boundary through vertical integration or contracting its boundary through outsourcing for

products or services, boundaries are characterized as mov- ing easily and automatically in response to any change in the relative cost or efficiency of conducting exchange. Moreover, boundaries will be characterized by information distortion or low veridicality as a consequence of actor self-interest, opportunism, bounded rationality, and information asymmetries between exchange partners (Williamson, 1975,1985). These factors lead the participants in an exchange to exhibit predictable tendencies toward guile, deceit, information distortion, and efforts to renegeonthe rulesandconditions ofexchange(Granovetter, 1985; Perrow, 1986). These humanconditions surrounding exchange conspire to reduce veridicality, that is, to cause distortions and biases in the accuracy and veracity of information pertinent to exchange (Jones, 1987).

Proposition 5 A When a boundary’s function is transaction assignment, higher permeability will result in more strategic latitude for conducting exchange.

Proposition 5B: When a boundary’s function is transaction assignment, lower stability will result in greater organizational efficiency.

Proposition 5C: When a boundary’s function is transaction assignment, lower veridicality will result in stronger justification for internal governance mechanisms.

The transaction cost framework suggests that most internal organizational transactions couldconceivably be conducted externally (Porter, 1980) if the cost of these transactions were sufficiently low (e.g., segments of the book publish- ing and recording industries). The organization’s ability to select between the alternatives of internal exchange or exchange across the organization’s boundary implies con- siderably more strategic latitude for conducting exchange than more traditional organizational theories have tended to emphasize (Lawrence & Lorsch, 1967; Perrow, 19%). It is the potential for high permeability or openness between organizations and markets that gives organizations the option to select between alternative modes of exchange (subject to cost). The more open the organization to market opportunities for conducting transactions, the broader the strategic latitude an organization possesses for conducting exchange.

Ease of movement between these two modes also enhances organizational eficiency . If assignment decisions reduce to transactioncosts exclusively, as Williamson (1975, 1985) suggests, then factors that tend to fix or solidify a particular mode of exchange (such as habit, traditions, or loyalty to a particular supplier) will play little or no role in determining exchange. Under these conditions, the fluidity of choice between boundary closure and openness permits the organization to choose that alterna-


live that will maximize its efficiency. Since bounded rationality, actor self-interest and opportunism, and the costs of acquiring information to monitor and enforce contracts are significant costs of transaction, this also provides strong justification for the use of internal governance mechanisms (e.g., performance appraisal, accounting and control procedures) to curb opportunism and information asymmetries. In other words, the costs of low veridicality (i.e., high information distortion) in exchange give organizations a strong rationale for implementing operating control mechanisms (Greenwood, Hinings, & Brown, 1990) to reduce the potential for interest-seeking behaviour among its members. Therefore, higher permeability, and lower stability and veridicality in organization-market relations will tend to enhance the options available to organizations for conducting exchange, increase the ease with which organizations can respond to efficiency considerations in conducting transactions, and give organizations a stronger rationale for implementing control mechanisms to monitor and enforce organization members’ interest-seeking activities.

Isomorphism and Image Transmission

Proposition 6 When boundaries serve an isomorphism and image transmission function, they will be characterized by high permeability, low stability, and high veridicali ty.

High permeability or openness in boundary relations with the institutional environment is the defining requirement of conformity or isomorphism with the institutional environment. Institutional theorists view organizations as nested within and largely indistinguishable from this environment (Meyer & Rowan, 1977). From an institutional perspective, “it is no longer possible to thinkof the environment as something ‘out there’; its elements are part of the organization.. .interpenetrating it, infusing it with value and connecting it to larger systems” (Scott, 1987, p. 139). Image transmission also makes the organization’s boundary more permeable, since organizations will open their boundaries to represent themselves externally (Aldrich, 1979).

Conformity to institutional expectations also requires boundary fluidity. Organizations commonly expand their boundaries to coopt and incorporate institutional elements of the environment or to add administrative units in response to institutional demands (Meyer, Scott, & Strang, 1987; Oliver, 1991; Tolbert, 1985). For example, Selznick’s (1949) seminal research on the Tennessee Valley Author- ity described how the organization expanded its boundary to coopt and import outside institutional interests. Several studies have also shown how organizations expand or elaborate their administrative complexity to exhibit institu-

tional conformity (Meyer, Scott, & Strang, 1987; Tolbert, 1985). Efforts to achieve isomorphism or conformity lower boundary veridicality as well. Social information in the institutional environment will tend to be mirrored within the organization over time, as organizations move toward greater isomorphism with the institutional environment (DiMaggio & Powell, 1983; Meyer & Rowan, 1977). Given the “tendency for organizations to disappear as distinct and bounded units” (Meyer & Rowan, 1977, p. 346), boundaries play a minimal role in distorting the meaning or accuracy of institutional expectations that impinge on the organization.

Proposition 6A. When a boundary’s function is isomorphism and image transmission, higher permeability will result in greater organizational legitimacy.

Proposition 6B: When a boundary’s function is isomorphism and image transmission, lower stability will result in higher responsiveness to changing institutional demands.

Proposition 6 C When a boundary’s function is isomorphism and image transmission, higherveridicality will result in higher organizational visibility and social support.

When an organization opens its boundary to the institutional environment, it incorporates the rules, values, and expectations of the institutional environment, thereby enhancing its legitimacy (Hinings & Greenwood, 1988b; Meyer & Rowan, 1977; Zucker, 1987). By importing institutional myths and values, “[tlhe organization demon- strates that it isactingonacollectivelyvaluedpurpose. ..the organization becomes, in a word, legitimate, and it uses its legitimacy to strengthen its support and secure its survival” (Meyer & Rowan, 1977, p. 349). Boundary fluidity, in the form of elaborating organizational structures to accommodate institutional demands (e.g., changing government rules and regulations) also increases an organization’s responsiveness and sensitivity to institutional values and beliefi (Meyer & Rowan, 1977; Oliver, 1991). A firm, for example, that is able to expand its administrative capacity to accommodate affirmative action requirements will be more responsive to institutional expectations and, therefore, more likely to survive (Scott & Meyer, 1983). Rowan (1982) showed how public schools expanded their administrative services to attain isomorphism with prevailing norms and values in the institutional environment, thereby increasing their responsiveness to institutional requirements and enhancing their degree of social acceptability. Low veridicality in relations between the organization and its institutional environment also increases the visibility and profile of an organization and its degree of social support. When an organization accurately mirrors or re-

13 RCSA/CTAS, N(l), 1-17


flects the values and beliefs of the institutional environment, it signals its adherence to institutional prescriptions of appropriate conduct and is predicted to increase its social acceptability and survival prospects (Scott & Meyer, 1983; Zucker, 1987). Recent research evidence on institutional relations provides strong evidence for these organizational consequences (Baum & Oliver, 1991).

Implications For Future Theory and Research

The foregoing has proposed that there is a predictable relationship between boundary functions and properties (“able 2), and between boundary properties and strategic outcomes (Table 3). These proposed relationships have several theoretical implications.

First, openness, stability, and veridicality in organization-environment relations are not always beneficial to the organization. If openness facilitates the acquisition of resources and legitimacy, then closure also increases an organization’s influence over its members and work processes. Ifstability increases the predictability ofexchange in task environments, then fluidity also enhances an organization’s responsiveness to changing institutional and competitive demands. If accuracy reduces uncertainty and facilitates adaptability, then distortion also protects proprietary knowledge and justifies the need for internal control. This paper has identified ten determinants of boundary functions and linked these functions, in turn, to variation in openness, stability and accuracy, and resulting strategic advantages. The appropriateness of openness, stability, and accuracy can be predicted from these contextual and organizational determinants that give rise to the necessity for boundaries to serve a particular function. For example, if employee turnover is unusually high and there are mounting external threats to membership control, then boundary closure between the organization and its human resource environment is predicted to be the most appropriate boundary management strategy.

Second, organizations need to gauge the effectiveness of different boundary strategies in relation to distinct subenvironments. Boundaries typically serve multiple functions and this multiplicity of purpose is the consequence of organizational attempts to respond to the diverse components of the environment, each of which imposes unique constraints on the organization. These components include the human resource, information, task, market and social environment of the organization. The appropriateness of permeability, stability, and veridicality will depend on the particular aspect of the environment to which an organization needs to respond. Constraints indifferent sub-environments often require changes in separate parts of the organization or the mobilization of different subsets of organiza-

tional competencies or personnel. In practical terms, this means that responses to environmental demands can be partially compartmentalized and that organizations can, to some extent, manage for both openness and closure, stability and fluidity, veridicality and distortion simultaneously.

In conceptual terms, this suggests that generalized characterizations of organizations as open systems (Bertalanffy, 1%2; Buckley, 1%7), uncertainty reducers (Pfeffer & Salancik, 1978; Thompson, 1969, or information seekers (Tushman, 1977; Weick, 1979) misrepresents the variety of external demands to which Organizations typically respond. Instead, organizations typically seek closure to maximize their autonomy but openness to acquire organizational throughputs, just as they seek stability to reduce uncertainty but fluidity to enhance adaptability, or veridicality to enhance credibility but distortion to escape detection. Therefore, the need for openness, stability, or accuracy should be linked to the functions boundaries serve in different sub-environments and the organizational and contextual causes of these functions.

Third, the effectiveness of boundary management should be evaluated in terms of a range of organizational objectives. The five alternative boundaty conceptions - membership, role set, sphere of influence, transactions cost dichotomy,and institutional filter-suggest thatorganiza- tions are motivated to obtain influence, information, resources, efficiency, and legitimacy. Therefore, organizational goals commonly include greater autonomy, less uncertainty, higher growth and profitability, stronger competitive positioning, and more social acceptability. The appropriateness of boundary permeability, stability, and veridicality should be assessed in terms of the particular goal@) that an organization pursues. Boundary management is a process of establishing priorities among multiple objectives and attending to the multiple requirements of labour markets, information needs, task resources, market competition, and institutional expectations.

Finally, three lines of research inquiry are suggested by the causal relationships proposed in this paper. First, the link between organizational and contextual determinants and boundary functions should be investigated. Taking membership as an example, if employee turnover is be- coming high and threats to membership control are increasing (e.g., low selection standards, industrial espionage, employees leaving to join competing firms), these factors can be used to predict the likelihood that organizations will reduce their boundary permeability (e.g., higher entrance requirements, more security around information leaks). Other external threats to autonomy (e.g., impending unionization or government intervention) might also be investigated to determine the likelihood of more boundary closure .

Second, the link between boundary functions and properties warrants investigation. For example, when

14 RCSA I CIAS, (l), 1-17


boundaries serve a connective or bridging function, how does this increase boundary openness? Do resources or information flow more easily across the organization’s boundary? Given the multiple determinants of interorganizational connections (Oliver, lW), do certain types of connections (e.g., joint ventures, board interlocks) foster more openness than others (e.g., arms length agreements)?

Finally, the causal relationship between boundary properties and strategic outcomes should be investigated. Eighteen specific propositions were advanced as a starting point for examining this relationship. These propositions outline strategic outcomes for each boundary function. In addition, the interaction among outcomes should be exam- ined. Given each boundary function and relevant sub- environment served, are tradeoffs necessary between predictability and flexibility? between resource access and organizational autonomy? between adaptability and internal control? Or do organizations attempt to segment their environments into distinct subsets of boundary relations (labour markets, task environment relations, institutional relations, for example) to minimize contradictory demands for openness versus closure or accuracy versus distortions? Studies contrasting the roles of boundary spanners that serve segmented functions (e.g., personnel recruiters, purchasing agents, labour negotiators, lobbyists, credit man- agers) might be a starting point to address these issues. Alternatively, research might be conducted on the possible role conflict that boundary spanners experience (Adams, 1980) in attempting to satisfy contradictory demands for both openness and closure, or bothveridicality and secrecy in dealing with external constituents.

Conclusion

This paper is the first to review alternative definitions of organizational boundaries, to elaborate the boundary functions that these alternative conceptions imply, to identify the relationships between boundary functions and properties, and to examine the strategic advantages of different boundary properties. Table 1 summarized the factors that cause boundaries to serve particular functions; Tables 2 and 3 summarized the predicted effects of these boundary functions on boundary properties and organizational outcomes.

Although the concept of boundary is embedded in any theory that addresses organization-environment or interorganizational relations, there has been little effort in the literature to explain the purposes boundaries serve or the boundary characteristics that have a particularly crucial impact on organizational survival. This paper has suggested that boundarypermeability, stability, andveridicality are primarily the outcome of a boundary’s functions and that these properties produce a variety of crucial strategic

advantages for organizations that are directly relevant to organizational survival. This paper has also shown that distinctive strategic advantages may result from both high and low levels of permeability, stability, and veridicality, suggesting that openness to the environment, stability in organization-environment relations and information accuracy in exchanges with the environment are not invariably advisable objectives of boundary management. Instead, the strategic utility of openness, stability and accuracy in organization-environment relations will be critically dependent on the specific contextual and organizational factors associated with each component of the environment that makes particular functions necessary. Stated differently, the organizational and contextual determinants of boundary functions identified in this paper are hypoth- esized to dictate the prescribed levels of permeability, stability, and veridicality that an organization’s boundary should possess in order to be most effective in dealing with its various subenvironments.

If boundary functions are as varied as the subenvironments that cause them to be implemented, then boundary management strategies will be more effective to the extent that decision-makers acknowledge the distinctions among these subenvironments and the organizational objectives - control, knowledge, resources, efficiency, and legitimacy - that tend to be associated with each component of the environment. It is also the case that no single theoretical framework is likely to do full justice to the range of purposes that boundaries serve or the variation in properties that boundaries exhibit. For this reason, future theory and research on boundaries that builds on a multitheoretical perspective is likely to provide a more accurate and com- prehensive portrayal of the factors that predict and explain boundary management and effective organization-environment relations.

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