Our research contributes to the literature on complexity management, corporate sustainability strategies and their link with resilience and long-term competitiveness. We examine the most relevant findings for each of these areas of research in the following sections.
2.1 Complexity management and organizations
Complexity is an elusive construct that is often placed at the center of corporate management and strategy, whose interpretation and conceptualization can vary according to the specific research field (Jacobs and Swink
2011). In particular, since the 1960s, complexity has been a dominant concept in the organization research arena (Anderson
1999). A complex system responds to the classic definition of being made of a large number of parts that have multiple interactions (Simon
1962). The level of complexity of the organization tends to grow with increasing abundance (the number of elements that influence each other), correlation (the strength of mutual relationships) and diversity (Osbert-Pociecha
2013). From this definition, it is possible to classify two different types of complexity. The first one is structural complexity, which refers to the number of different elements constituting the system; the second one is dynamic complexity, which refers to the number of interactions within the system (Bode and Wagner
2015).
In organization theory, complexity has been interpreted as a structural variable characterizing both organizations and their environments and that can have multiple dimensions and categorizations. For instance, vertical complexity captures the number of levels of the organizational hierarchy, horizontal complexity the number of departments across an organization and spatial complexity the number of geographical locations (Daft
1992). Moreover, complexity refers also to the number of different external elements (clients, suppliers, stakeholders) that must be dealt with simultaneously by the organization (Scott
1992). Therefore, an appropriate theoretical framework of complexity management should capture the complexity of an organization’s internal structure and technology with the complexity of its external environment (Größler et al.
2006).
The management of the various types of corporate complexity described in the previous paragraphs can be better understood considering the link between different components of complexity and corporate performance, and the relationship between complexity management and overall business management, which can determine the aggregate resilience of an organization. From this perspective, three main dimensions of complexity can be identified at the firm level relevant to our research questions.
The first dimension is
internal complexity, an extremely broad and nuanced construct that has been differently characterized by previous research (De Toni et al.
2016; Duncan
1972; Glenn and Malott
2004; Vogel and Lasch
2016). According to Glenn and Malott (
2004), internal complexity is composed of two main sub-dimensions:
component complexity and
hierarchical complexity. The first one refers to the number of elements that constitute an organization and the number of processes each system subsumes, while the second one refers to the number of system levels in the organization, such as the different levels of management. Therefore, a company’s internal complexity can rise, for example, when a greater number of employees are hired. Moreover, the more layers of components an organization establishes, the more hierarchical complexity increases. Consequently, hierarchical complexity is typically influenced by component complexity (Glenn and Malott
2004). Vogel and Lasch (
2016) propose an extensive literature review aiming at identifying the drivers that contribute to the increase of a company’s internal complexity. They differentiate between
internal correlated complexity, which is influenced by the external market’s complexity, and the
internal autonomous complexity, which, instead, is only determined by internal factors within the company. An exhaustive classification of the main drivers contributing to the internal correlated and autonomous complexity is provided in Table
1.
Table 1
Drivers of internal complexity.
Source: Authors’ elaboration, adapted from Vogel and Lasch (
2016)
Target complexity | Organizational complexity |
Customer complexity | Process complexity |
Product and product portfolio complexity | Production complexity |
Technological complexity | Planning, control and information complexity |
Product development complexity | Resource complexity |
Supply process complexity | Logistics complexity |
Service complexity | Sales and distribution complexity |
Remanufacturing complexity | |
All these drivers participate in increasing an organization’s complexity levels, and they can lead to systems turbulences (Vogel and Lasch
2016). Indeed, rising levels of this complexity dimension have been shown to weaken operational efficiency and decrease profit margins (Hoole
2006). For example, product complexity, which is one of the drivers, can have several negative implications on supply chain management and processes, related to aspects such as product development, supply of materials and delivery (Closs et al.
2008). Nevertheless, other studies have illustrated that there is a
good complexity that is essential to create value by increasing revenues, profits and customer loyalty, for example, through product customization (Anderson et al.
2006). Consequently, eliminating complexity is not the solution, while effectively managing internal product complexity can result in greater profits (Meeker et al.
2009), although this management can prove to be a challenging task (Closs et al.
2008).
The second dimension, directly correlated with the first one, is represented by
supply chain complexity. The literature has highlighted three key sources of supply chain-related complexity: (i) the number of suppliers, (ii) the differentiation among those suppliers and (iii) the relationships among the suppliers (Choi and Krause
2006). Therefore, this dimension is related, but not limited, to “interconnected flows of materials, funds and information between firms” (Bode and Wagner
2015). Supply chain complexity has been identified as a main obstacle to performance efficiency and one of the most demanding issues affecting supply chains (Bozarth et al.
2009). Moreover, this type of complexity has been recognized as one possible cause of supply chain disruptions (Narasimhan and Talluri
2009), which can undermine shareholder value, sales and corporate reputation and weaken relationships with other actors in the chain (Hendricks et al.
2009).
The last dimension is associated with
external complexity, otherwise known as spatial complexity, which refers to the number of different geographical locations a company must interface with, and their corresponding regulatory and financial implications. The organization must deal continuously with the external locations, directly or indirectly, either because they belong to the organization itself (for instance a production plant located in a foreign country) or to its supply chain (Daft
1992). The literature has emphasized how external complexity fuels supply chain complexity by increasing the risk of supply chain disruption in different ways (Blackhurst et al.
2007; Bode and Wagner
2015). For example, geographically dispersed locations can result in a physically longer flow of inputs, thus increasing transportation times and their variability, requiring more complex logistics systems. Moreover, the longer the distance between different actors in a supply chain, the greater the information-processing needs and monitoring costs (Bode and Wagner
2015; Stock et al.
2000). The latest evolutions in legal and voluntary requirements regarding corporate social responsibility, especially regarding themes such as decarbonization, climate double materiality and carbon footprints, pose new challenges for companies in terms of the degree of external complexity that firms must handle (Schneider et al.
2017). Recently there has been a new trend in analyzing how companies cope with various forms of external complexity thanks to collaborative strategies (Schneider et al.
2017). Indeed, some companies respond to increasing external complexity by enhancing their internal complexity within their own organization, while others may cooperate with external stakeholders to have access to more information outside of the organization itself.
There are many other classifications and alternative definitions of complexity that describe the dynamic challenges faced by organizations (Barr and Hanaki
2008; Cara et al.
2017; Läger et al.
2022; Liu et al.
2015). However, for our analysis, we choose to focus on these three levels of internal, supply chain and external complexity because they better characterize the areas that can be effectively managed within industrial electronics. Moreover, they allow us to examine some of the core challenges in introducing sustainable practices in this sector, as identified by the literature on transitions to cleaner production (Rizos and Bryhn
2022).
2.2 Corporate sustainability management and complexity
Sustainability is one of the leading issues in the latest business literature since more and more companies are trying to systematically integrate environmental and social evaluations into their processes and decisions (Hahn and Scheermesser
2006). Corporate sustainability is defined as “
the ability to conduct business with a long-term goal of maintaining the well-being of the economy, environment and society” (Hassini et al.
2012). Therefore, Corporate Sustainability Management (CSM) highlights how the viability of the company is strongly related to the ability to create profit without affecting the socio-ecological environment in which the company operates (Ameer and Othman
2012). Thus, CSM can be interpreted as “
the interdependence between the company, the community and the environmental” (Rahardjo et al.
2013). Consequently, economic sustainability, the primary objective of every business throughout history, is not a sufficient condition for achieving long-term corporate sustainability (Maia et al.
2022). Moreover, since sustainability needs to be considered and integrated far beyond corporate boundaries, it is necessary to engage stakeholders within an organization and all along the supply chain, both upstream and downstream. For this reason, Sustainable Supply Chain Management (SSCM) is a crucial factor in each sustainability strategy (Rajindra et al.
2019).
There are different levels of integration of sustainability within an organization and its supply chain. Formentini et al. (
2016) have identified three main categories: (i) the
sustainability leaders, namely those adopting a Triple Bottom Line approach (TBL—mainly defined as the expansion of business success metrics to include contributions to environmental health and social welfare, in addition to the already established economic and financial assessments) by integrating it with Sustainable Supply Chain Management (SSCM); (ii) the
sustainability practitioners, whose business sustainability approach has a limited focus on one or two dimensions of the TBL, with a SSCM still poorly developed; and, lastly, (iii) the
traditionalists, whose business approaches are not directly oriented toward sustainable management, but might present some sustainability-related initiatives. Indeed, although the importance of CSM practices can be understood by the company’s players, they struggle to implement them, and consequently, they often neglect them (Ameer and Othman
2012).
In this context, understanding how complexity can impact the implementation of CSM is crucial, since it is one of the main challenges to address in terms of organizational management and strategy (Jäger et al.
2014). However, the literature has not yet identified a univocal relationship between managing simultaneously different dimensions of corporate complexity and the adoption of CSM practices, currently allowing for conflicting visions.
On the one hand, the management of corporate sustainability imposes upon companies new layers of complexity that need to be addressed. For example, Schneider et al. (
2017) show how the external complexity that a company must handle increases when it needs to integrate corporate sustainability issues. To cope with this increased external complexity, organizations modify “their structures, processes, rules or routines,” thereby increasing internal complexity as well (Schneider et al.
2017). Typically, these companies need to introduce several new organizational components, like sustainability teams and departments, internal policies and procedures (e.g., codes of conduct or conflict minerals policies), sustainability reporting, measures aimed at promoting sustainability awareness among employees through training, etc. (Baumann-Pauly et al.
2013; Schneider et al.
2017).
On the other hand, several studies claimed that proper management of corporate complexity can support and facilitate the adoption of sustainability practices (Espinosa and Porter
2011; Läger et al.
2022; Schneider et al.
2017). Espinosa et al. (
2011) emphasize how complexity requires companies to “actively cultivate and enrich the conditions for knowledge assimilation” by implementing learning mechanisms and acquiring new skills to adapt to new and unpredictable conditions. These mechanisms are also activated during the adoption processes of CSM practices: to internalize sustainability issues into a company’s daily operations, since sustainability is a broad and evolving field, there is a need to approach complex learning processes that enhance new knowledge and skills to embrace this continuous evolution (Bianchi et al.
2022; Kabongo and Boiral
2017).
Overall, our paper complements previous research on barriers and enablers for the implementation of corporate environmental sustainability in the EEE industry (Rizos and Bryhn
2022), by providing evidence of the twofold role that complexity plays within multitier and multiproduct value chains: on the one hand, it presents several challenges for managers approaching sustainability but, on the other hand, if properly managed, it can also offer opportunities for innovation and new areas of competitiveness deriving from sustainable corporate development.
2.3 Resilience, sustainability and complexity management
The concept of resilience has been extensively investigated by different streams of research (Gunderson
2000; Luthar et al.
2000; Rose
2007; Wiedmer et al.
2021; Youn et al.
2011). However, its relevance in the context of corporate management and supply chain management has intensified in the past decade (Chowdhury et al.
2019), especially in relation to corporate sustainability issues (e.g., Ortiz-de-Mandojana and Bansal
2016; Souza et al.
2017; Winnard et al.
2014). This literature has shown how environmental sustainability practices help companies that adopt them to accumulate intangible assets, such as organizational reputation, strategic partnerships and engaged workforce. These companies are also able to better perceive problems in the external environment and adapt accordingly. As a result, these environmental sustainability practices contribute to their resilience and viability in the long term (Ortiz-de-Mandojana and Bansal
2016).
Moreover, global supply chains, such as those in industrial electronics, are increasingly facing a variety of disruptions, caused, for example, by natural disasters, opportunistic behaviors of some actor in the chain or industrial accidents (Macdonald and Corsi
2013), which can dramatically impact the performance of the whole supply chain (Ali et al.
2017; Chowdhury et al.
2019; Jain et al.
2017). In particular, natural disasters and extreme climatic events play a significant role in the rush to strengthen organizational resilience, as the greater scope, occurrence and magnitude of these events are a direct result of the climate crisis we are witnessing (IPCC
2022). The spread of the COVID-19 pandemic is an evident example of the damages that disruptions can provoke to supply chains and more broadly, to global economics (Pellegrino and Gaudenzi
2023; Shen and Sun
2023).
In order to minimize and cope with the potential hazards of these events, organizations are trying to build the required capabilities to ensure the resilience of the system, both at the firm and supply chain level. Accordingly, resilience generally represents the “ability to resist disruptions and recover operational capability after disruptions occur” (Wiedmer et al.
2021), while, in the case of supply chains, it can be considered as “the adaptive capability of a supply chain to prepare for and/or respond to disruptions, to make a timely and cost-effective recovery and therefore progress to a post-disruption state of operations” (Tukamuhabwa et al.
2015). As a consequence, management studies have interpreted resilience as the capability of adaptability of the organization (Souza et al.
2017).
As highlighted by Donadoni et al. (
2018), complexity is considered one of the main drivers of disruptive events and it can also influence the degree to which businesses can enhance their resilience (Blackhurst et al.
2005; Christopher et al.
2011; Kim et al.
2015). However, the existing literature on the relationship between supply chain complexity and resilience shows inconsistencies when it comes to determining the impact of complexity on managing supply chain disruptions, leading to the emergence of two opposing streams of research. The first one provides evidence that higher levels of complexity can increase the frequency and severity of supply chain disruptions, thus weakening the resilience of the systems involved (Bode and Wagner
2015; Wiedmer et al.
2021). For example, Donadoni et al. (
2018) demonstrated how product complexity in a supply network can increase the frequency of disruptive events, consequently worsening plant performances. On the contrary, the second stream affirms that, by improving and increasing flexibility, a higher level of complexity can strengthen resilience to disruptions (Closs et al.
2008; Craighead et al.
2007; Pettit et al.
2013). Notably, Birkie et al. (
2017;
2020) stated that to build resilience and supply chain disruption orientation—the capability of a firm to accumulate and incorporate learning gained from managing the disruptions to improve its future response management system (Hussain et al.
2023)—a certain degree of complexity could be beneficial. Wiedmer et al. (
2021) advanced the discourse on this paradox by claiming that supply network complexity can have a double-edged impact on the resilience of supply chains against disruptions, both enhancing recovery after a disruptive event and weakening the resistance to a disruptive event.
Despite the considerable contribution of researchers in analyzing the nexus between supply chain complexity and resilience, there is not an equivalent clear framework for addressing the issue from a more comprehensive perspective of complexity. Indeed, current literature lacks a deeper understanding of the role played by the management of different dimensions of complexity as resilience enablers (Souza et al.
2017).