The Complexity Trap – Limits of IT Flexibility for Supporting Organizational Agility in Decentralized Organizations

In times of digitalization, organizations are transforming to become more agile. Decentralizing decision-making to lower levels of the organization allows firms to better detect changes in their environment and to sense new opportunities. Simultaneously, the digital transformation of a firm is increasingly relying on a flexible IT function. This study explores how decentralization of decision-making power increases organizational agility and to what extent this relationship is dependent on IT flexibility. We conducted a quantitative study using two rounds of surveys with 123 respondents from the consulting industry. Based on covariance-based SEM, we find that too much flexibility of the IT function in combination with decentralized decision-rights creates a complexity trap and, thus, decreases organizational agility. These findings carry several theoretical contributions for organizational agility research and shed new light on the role of IT flexibility for digital transformation