Role of manufacturing flexibility in managing duality of formalization and environmental uncertainty in emerging firms

Abstract Increased firm formalization helps emerging firms develop stable routines and processes to increase their chances of survival. However, uncertain and dynamic task environments of emerging firms require more flexible organizational structures. Such duality of structural prescriptions stems from competing demands of task and institutional environments. We propose that manufacturing flexibility could help decouple activities required in task environments from those required in institutional environments, thereby mitigating the conflict of adopting flexible and rigid structures at the same time. An emerging venture could meet demands of institutional environments through formalized structures, and use manufacturing flexibility to address needs of task environment in order to mitigate liabilities of newness. Using a sample of 167 high‐technology manufacturing firms in the UK, we use a moderated polynomial regression approach to test the proposed framework. Results indicate that formalized structures in conjunction with manufacturing flexibility lead to enhanced performance. The findings extend literature on organizational structures in operations management and entrepreneurship.