Resetting the Clock: The Dynamics of Organizational Change and Failure
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Do organizations readily and successfully change? The literature has provided various answers to this question. Many influential theories have assumed that organizations are relatively malleable, able to adapt when circumstances change (e.g., Thompson, 1967). Hannan and Freeman's (1977, 1984) structural inertia theory challenged this view, depicting a world of relatively inflexible organizations in which change is both difficult and hazardous. Theorists usually consider these views to be mutually exclusive alternatives (e.g., Scott, 1987). In this spirit, recent work has tried to define boundary conditions between the two views, distinguishing among changes as either adaptive or disruptive and distinguishing among conditions that facilitate or impede change (Hannan and Freeman, 1984; Singh, House, and Tucker, 1986; Kelly and Amburgey, 1991; Haveman, 1992). Because there are important differences between the two perspectives, there is value in searching for boundary conditions between them, but we believe that these views are not in opposition: An organizational change can be both disruptive and adaptive, and organizational inertia can actually increase the likelihood of organizational change.
Organizational Inertia and Disruption
Much organization theory is concerned with the relative advantages of alternative configurations of organizational attributes. As a consequence, much of the literature on organizational change has focused on the content of changes: A switch to a more advantageous configuration is defined as adaptive, while a switch to a less advantageous configuration is defined as deleterious. A number of other theories focus, instead, on the process of change itself and suggest that, in most cases, organizations strongly resist change. Some theories focus on linkages between the organization and the environment: Resistance to change occurs because organizations are embedded in the institutional and technical structures of their environment (Granovetter, 1985). Others focus on factors internal to the organization, such as how change is often opposed by organizational members (Coch and French, 1948) and even when change is advocated by some organizational members, established roles and formal organizational rules are difficult to alter quickly (Tsouderos, 1955; Stinchcombe, 1965; McNeil and Thompson, 1971; Hannan and Freeman, 1977).
Hannan and Freeman's (1984) structural inertia theory offers a model of the process of organizational change that includes both internal and external constraints on organizational change. The first part of their argument addressed the probability of organizational change. They argued that organizations exist because they are able to perform with reliability and, if questioned, to account rationally for their actions. Reliability and accountability are high when organizational goals are institutionalized and patterns of organizational activity are routinized, but institutionalization and routinization also generate strong pressures against organizational change. Thus, the very characteristics that give an organization stability also generate resistance to change and reduce the probability of change. The second part of their argument dealt with the effect of organizational change on survival. They argued that because both internal and external stakeholders prefer organizations that exhibit reliable performance and because change disrupts both internal routines and external linkages, organizational change is hazardous.
In this paper we attempt to broaden and expand the structural inertia model. …