Impact of knowledge networking and organizational learning on the performance of organizations

This paper analyzes the impact of different kinds of change on the performance of an organization, depending on the underlying organizational form: hierarchical organizations are optimized top-down with only formal communication, while in networked organizations members have many lateral ties and informal communication channels are available. Based on the hypothesis that in face of change networked organizations learn faster than purely hierarchical ones, a model for performance comparison between these two organizational types is introduced. A theorem is presented and proved, which shows that as long as the communication overhead required for networking activities is smaller than a certain amount, an organization with networking culture and structures performs better than a corresponding purely hierarchical organization. Finally, a series of case studies providing evidence supporting the hypothesis will be presented examining the effects of networking at Siemens IT Solutions and Services PSE at project, corporate, and international level.