Specialists and generalists in adaptive organizations

This study examines the optimal organizational composition of specialists and generalists theoretically and empirically, using a model based on Dessein and Santos (2006). It assumes that specialists excel in adaptation given their deep knowledge in specific areas but face coordination challenges given limited knowledge of other areas. In contrast, generalists benefit from broad task experience, making them superior in coordination but less effective in adaptation than specialists. The model predicts the following monotonicity: the optimal organizational structure shifts from one with many specialists to one with many generalists as the importance of coordination (relative to adaptation) increases or as market uncertainty increases under the condition that the importance of coordination is sufficiently high. These predictions are tested using employee assignment history data from a large Japanese trading company. The dataset includes employees who joined the company in fiscal year 1984 or later and their records up to fiscal year 2023. As predicted, divisions in commodity trading, where adaptation to their market condition is relatively crucial, have more specialists than divisions in business investment, where coordination is key. Among the business investment divisions, the proportion of generalists is higher in those with higher market uncertainty.