MIT Sloan School of Management Working Paper 4563 - 05 October 2005 ORGANIZATIONAL DESIGN , ORGANIZATIONAL LEARNING , AND THE MARKET VALUE OF THE FIRM

We compare market returns associated with firms’ creation of new units focused on e-business. Two aspects of organization design governance and leadership are considered with regard to exploitationand exploration-oriented organization learning. We find that exploitation in governance (high centralization) is associated with a lower mean and variance in returns; that exploitation in leadership (appointment of outsiders) is associated with the same mean yet higher variance; and, among units exhibiting both modes of learning, the variance of returns are not equal.