ABSTRACT
Chapter 1 critiqued the extant literature on major military change, suggesting that
the intra-organizational diffusion of innovation is an important but much overlooked
issue. In this chapter, we present a theoretical framework to fill this void. We argue
that material and normative factors related to intra-organizational control can be
complementary, and that examining synergies via a modified principal-agent
framework augurs well for a systematic explanation of military transformation. The
core claim here is that the capacity of service entrepreneurs to hone and sustain
transformation is largely a function of the internal structure of delegation and
oversight. These factors specify the division of authority and range of preferences
for exploration versus exploitation in task environments, the costs of monitoring
and enforcing new tradeoffs between these preferences, and the incentives for
opportunism within the organization. If properly aligned, they can profoundly
narrow the gap between what military commanders ask for in terms of change and
how subordinates choose to respond. Given the intrinsic uncertainty, however, we
add that principals must rely on elements of common knowledge to legitimate new
directions and boost the credibility of commitments to transformation. Specifically,
shared assumptions about professionalism and appropriate methods for problem-
solving, as opposed to common understandings of service mission, provide points of
leverage for organizational entrepreneurs to reduce the transaction costs of overseeing
change. Thus, while the scope of success at institutionalizing military transformation
depends critically on getting the incentive structure “right”—aligning choices and
behavior across different levels of hierarchy-the efficiency of doing so turns on the
instrumental use of managerial norms.
