This article explores the concept of structural embeddedness and proposes a construct, contextual links, which represent coordination mechanisms applied to activities that may embed activities and their underlying resources within their business units. The main argument is that if activities and resources are highly embedded in unit structures, then unit reconfiguration should have an impact on activity reconfiguration, where reconfiguration refers to movement within the firm and retention or deletion from the firm. Specifically, the article argues that if there is a significant structural embeddedness, then removal from the contextual environment within which activities reside will result in their creating less value. Theoretical support is drawn from the dynamic capabilities and organization design literatures. Activity movements are specified as default, linked, or unlinked changes. The article examines, empirically, the simultaneous effects of activity and unit reconfiguration on activity retention to gain insight on structural embeddedness. It contrasts activity-level and unit-level contextual links; whereas the former refers to activities embedded in units, the latter refers to units embedded in the firm. Findings reveal that preserving activity-level contextual links is more influential than preserving unit-level contextual links in determining value creation from activities and their resources.
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