Corporate Governance and Complexity Theory
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Corporate Governance and Complexity Theory

Marc Goergen, Christine A. Mallin, Eve Mitleton-Kelly, Ahmed Al-Hawamdeh and Iris Hse-Yu Chiu

This multidisciplinary book takes an innovative approach to corporate governance by linking governance and complexity theory. It provides important new insights into why governance systems are failing and what may be done to improve this situation.
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Chapter 5: Complexity and Corporate Governance

Marc Goergen, Christine A. Mallin, Eve Mitleton-Kelly, Ahmed Al-Hawamdeh and Iris Hse-Yu Chiu


5.1 INTRODUCTION The literature applying complexity theory to corporate governance seems to be limited to the following broad categories and the literature review looks at each of these categories in turn: 1. 2. 3. 4. 5. 6. 7. Networks Path dependence Co-evolution Emergence Evolutionary strategy using fitness landscapes and self-organization Reflexive Adaptive Systems The broader view and CSR (Corporate Social Responsibility) There are two major weaknesses with the literature cited. One is that most authors concentrate on one or very few complexity principles (MitletonKelly, 2003); the other is that most of the work reported is theoretical rather than practical.1 This chapter will outline some of the main principles of complexity which are relevant to human systems and will illustrate them using a practical example.2 The approach used by the LSE Complexity Group is grounded in practice, as it starts with the problem space and uses in-depth interviewing and analysis to understand the multiple inter-related, underlying causes that together create the problem space. Furthermore, the analysis includes all the relevant complexity principles, as this provides a more thorough and comprehensive explanation of the phenomena under study and their dynamics. Complexity theory need not be used only as an explanatory and descriptive framework, but may be used to move from a deep understanding of the problem space to create an Enabling Environment that addresses the problem in a sustainable way. Enabling Environments are the set of cultural, social, technical, physical, legal, political, economic and other conditions that together create that environment. They...

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