Making Sense of Internal Competition: Designs for Organisational Redundancy in Response to Environmental Uncertainty

This paper examines "internal competition"-duplicate or overlapping activities within the boundaries of the firm that are condoned by senior management as a means of addressing a technological or market uncertainty. Building on redundancy theory, we argue that internal competition is a form of redundancy that allows the organization to adapt in the face of environmental change. We identify two particular designs for redundancy-duplication and overlap-and the key conditions under which each one occurs. Implications for organisation performance and the management of internal competition are discussed. The purpose of this paper is to put forward a theoretical framework and research agenda to explain the phenomenon of internal competition, by which we mean the often-temporary existence of duplicate or overlapping activities within the boundaries of the firm 1. For example, there may be two product development groups trying to solve the same technological problem, two business units producing competing products, or two distribution channels serving the same customer group. All of these, we will argue, are common phenomena in large firms, and yet the academic literature offers little coherent insight into how or why such duplication or overlap of activities occurs. An exploration of internal competition faces two major obstacles. First, it is not well recognised as an empirical phenomenon, even by those companies that engage in it. As we discuss later, internal competition is typically dispersed over several business units, and often lasts for only limited periods of time, so it is a phenomenon that ends up being managed on an exceptional basis, rather than in a systematic manner. As a result, there is no department within the firm, or even an individual, who has explicit responsibility for interna l competition. Compounding this problem, internal competition is typically viewed negatively by practising managers, because it is seen as a waste of resources and indicative of a lack of control. Organisations are interested in projecting decisiveness, not lack of control. Second, the phenomenon is not well recognised at an academic level. There are a number of streams of literature that address related concepts-there is research on internal market systems but none of them explicitly addresses the phenomenon of internal competition as described here. Moreover, the idea that an organisation would deliberately create duplicate or overlapping activities within its boundaries is antithetical to the traditional logic of how resources are allocated in organisations (Wiliamson, 1975; 1991). 4 The concept of internal competition, in …