Organizational Change and Organizational Mortality

Singh, Jitendra V.; House, Robert J.; Tucker, David J.

doi:10.2307/2392965

Cited by 437 publications

(253 citation statements)

References 25 publications

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“…Moreover, recent work finds that firm size effects are independent of baseline profitability (Bercovitz and Mitchell, 2007). Population ecologists also show that failure rates decline with age and size (Carroll and Delacroix, 1982;Carroll, 1983;Freeman, Carroll, and Hannan, 1983;Singh, House, and Tucker, 1986), arguing that liabilities of newness and smallness result from a lack of resources, legitimacy, and stability. Similarly, institutional theory suggests a higher failure rate for new and small firms that lack connections with and the approval and support of their institutional environment (Meyer and Rowan, 1977;Baum and Oliver, 1991).…”

Section: Firm Age and Sizementioning

confidence: 99%

Unpacking Firm Exit at the Firm and Industry Levels: The Adaptation and Selection of Firm Capabilities

Fortune

Mitchell

2011

Strategic Management Journal

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Evolutionary theory of business activity studies how firms are selected out of environments that they do not fit, but most existing work under-emphasizes the distinction between acquisition and dissolution as selection processes. We address this gap with a multi-level analysis that investigates how managerial and functional organizational capabilities affect whether struggling firms exit by acquisition or dissolution. We demonstrate that managerial and functional capabilities have heterogeneous effects on selection processes, with managerial capabilities having particularly strong influence on acquisition exits by struggling firms. The work provides a bridge between adaptation and selection views on organizational change; exit by dissolution represents selection of both firms and capabilities, while exit by acquisition represents firm selection but capability adaptation.Key words: Selection, capabilities, acquisition, dissolution, evolutionary theory, business dynamics 1 One of the fundamental tensions in strategic management theories of business evolution concerns the distinction between adaptation and selection when firms encounter problems. Early strategic management research typically assumed that business change primarily occurs by adaptation, in which executives of struggling firms actively lead strategic change of their underlying business capabilities (e.g., Cyert and March, 1963; Andrews, 1971). The evolutionary theory revolution of the 1970s and 1980s then highlighted the presence of strong firm-level inertia, which leads to population-level change in which many struggling firms fail to adapt and, as a result, exit from an industry Freeman 1977, 1989;Gort and Klepper, 1982;Nelson and Winter, 1982, 2002). Follow on studies have typically sought to demonstrate whether and when adaptation or selection tends to be the most pronounced force. What this debate has under-emphasized, though, is that different forms of exit -particularly, the contrast between shutting down and being acquired -have different implications for adaptation and selection. This paper argues that selection and adaption can occur concurrently at the firm and capabilities levels of analysis when one considers different forms of exit.We focus on the difference between business dissolution and business acquisition of struggling firms, emphasizing how different forms of exit reflect the evolutionary influence and fate of business capabilities. In particular, we argue that business dissolution entails a selection process that removes both a corporate entity and its underlying capabilities from the landscape, while acquisition represents a selection process that removes the corporate entity but preserves some of its organizational capabilities within the economic environment. We then argue that the extent of firm-specific managerial and functional capabilities influence whether a struggling firm exhibiting lackluster financial performance exits by acquisition or by dissolution. Hence, the paper studies mechanisms that shape micro le...

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Section: Firm Age and Sizementioning

confidence: 99%

Unpacking Firm Exit at the Firm and Industry Levels: The Adaptation and Selection of Firm Capabilities

Fortune

Mitchell

2011

Strategic Management Journal

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“…So the "coreness" of any structural element is based on analysts' assumptions about a specific class of organizations. For example, Singh et al (1986) regard CEO succession as a peripheral change, while editor-in-chief replacement is defined as an indicator of core change by Dobrev (1999). The problem pertains partly to excess generality in conceptualizing the core-periphery distinction: What constitutes a core organizational feature in one organization can be a peripheral structure in another.…”

Section: Core Vs Peripheral Organizational Changementioning

confidence: 99%

“…3 The niche concept has proved central in understanding the organization-environment relation, a dynamic that we seek to integrate more closely here to the analysis of organizational change. Relying on the definition of niche as a multidimensional constrained resource space including social, economic, and political dimensions (Freeman and Hannan 1983), subsequent analyses have shown how organizational environments affect the viability of particular types of organizations (Carroll 1988, Singh 1990, Baum and Singh 1994b and how the locations of organizations relative to each other along one (or a few) dimension(s) of resource space affect the dynamic of competition Mezias 1992, Baum andHaveman 1997). In all, while the primary advantage of conceptualizing the content-process model of change in terms of technological niches is the explanatory power of the niche concept, a secondary but equally important benefit is that doing so allows us to seed our theory with broader ideas from organizational sociology and integrate them within the framework of our model.…”

Section: Endnotesmentioning

confidence: 99%

Shifting Gears, Shifting Niches: Organizational Inertia and Change in the Evolution of the U.S. Automobile Industry, 1885–1981

Dobrev

Kim

Carroll

2003

Organization Science

119

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The full-text may be used and/or reproduced, and given to third parties in any format or medium, without prior permission or charge, for personal research or study, educational, or not-for-pro t purposes provided that:• a full bibliographic reference is made to the original source • a link is made to the metadata record in DRO • the full-text is not changed in any way The full-text must not be sold in any format or medium without the formal permission of the copyright holders.Please consult the full DRO policy for further details. AbstractWe examine how experiential learning affects organizational change and its consequences on firm mortality. We develop hypotheses about the interactions of experiences with a specific type of organizational change on the one hand, and environmental stability, organizational size, and organizational niche width on the other hand. Our findings draw from analysis of the U.S. automobile industry between 1885 and 1981 and support the general prediction that "process" effects of change in the organizational core elevate the hazard of failure. We also find that a dynamic interpretation of organizational environments as comprised of other organizations helps to explicate the interplay between organization and environmental forces that shape the occurrence and outcome of transformation.

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“…Miner et al (1990) demonstrated that Finnish newspapers reacted to several external shocks, including changes in state laws and policies, by changing one or more organizational dimensions, including content, language, and editorship. Singh et al (1991) found that voluntary social service organizations in Toronto adjusted their structures and goals in response to large-scale shifts in government funding. Most recently, Wade et al (1998) showed how state laws prohibiting alcohol had ramifications not only for beer brewers in the focal state, but also for brewers in nearby states.…”

Section: Punctuational Regulatory Changementioning

confidence: 99%

Organizational Environments in Flux: The Impact of Regulatory Punctuations on Organizational Domains, CEO Succession, and Performance

Haveman

Russo

Meyer

2001

Organization Science

182

126

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A central debate in organizational theory concerns how organizations evolve. There are two diametrically opposing viewpoints. Adaptation theories predict that change occurs as fluid organizations adjust to meet shifting environmental demands, while selection theories predict that change occurs through the differential selection and replacement of inert organizations as environmental demands vary over time. Our paper bridges these polar opposites by using a punctuated equilibrium framework to examine organizations' responses to discontinuous industrylevel change. This framework recognizes that the histories of many industries are occasionally punctuated by dramatic exogenous shocks, such as radical technological innovation, social and political turmoil, major changes in government regulation, and economic crashes. Our central thesis is that such environmental punctuations dramatically reduce pressures and rewards for organizational inertia and thereby alter both organizations' propensities for change and their survival chances following change.We focus on one form of punctuation, major regulatory change, and study firms in two industries: general hospitals and savings and loan associations. For organizations in both industries, we examine three important outcomes: shifts in organizational domain, CEO succession, and changes in financial performance. Our analyses show that punctuational regulatory change prompts shifts in organizational domains and executive leadership. Additionally, post-punctuation domain change and post-punctuation CEO succession both affect subsequent performance. We discuss our results in light of current thinking about the content and process effects of core organizational change, which has been developed in the context of stable environments. Finally, we argue for the development of more temporally sensitive theories of organizational action. (Organizational Evolution; Punctuated Equilibrium; Deregulation; Organizational Change; Organizational Inertia; Organizational Performance; CEO Succession) Change in the core attributes of organizations is difficult and fraught with peril. Organizational ecologists have proposed that when organizations change, resources are diverted from operating to reorganizing, which reduces efficiency and survival chances (Hannan andFreeman 1984, 1989;Amburgey et al. 1993; Barnett and Carroll 1995). These process effects of core change-the costs associated with redirecting resources from operations to reorganization, learning new routines, and building new relations with exchange partners-are expected to be negative. In contrast, the content effects of core change-the impact of adjusting to fit environmental demands-may be positive or negative, depending on the luck and skill of organizational decision makers and implementers. Considering process and content effects together, core organizational change is likely to impair performance and may even lead to failure.Despite the inherent riskiness of core organizational change, it is sometimes necessary and...

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Organizational Change and Organizational Mortality

Cited by 437 publications

References 25 publications

Unpacking Firm Exit at the Firm and Industry Levels: The Adaptation and Selection of Firm Capabilities

Unpacking Firm Exit at the Firm and Industry Levels: The Adaptation and Selection of Firm Capabilities

Shifting Gears, Shifting Niches: Organizational Inertia and Change in the Evolution of the U.S. Automobile Industry, 1885–1981

Organizational Environments in Flux: The Impact of Regulatory Punctuations on Organizational Domains, CEO Succession, and Performance

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