Who Does What? An Organizational Design Perspective on Buyer-Supplier ‘Packaging’ Problems

This study examines the organizational architecture of project organizations formed to deliver one-off, capital-intensive systems. We investigate how the project promoter divides and allocates the scope of the development work across multiple suppliers, and thus sets organizational boundaries around the work of each supplier – the so- called ‘packaging problem’. Our research is informed by the analysis of the procurement choices in the implementation phase of four large infrastructure projects. Our main contribution is a conceptual framework that illuminates how four complementary cognitive perspectives are brought to bear in decision-making for designing organizational architectures. We propose that the organizational boundaries that delineate each supplier’s work are the outcome of an organizational decomposition that balances efficiency concerns with considerations about the actual capabilities of the suppliers in the market. However, we also show that organizational boundary setting is context-sensitive. Hence, the solution space for potential organizational architectures is constrained by the power interdependency between the buyer organization and the environment and by the organizational identity of the buyer organization.