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Getting Trapped in the Suppression of Exploration: A Simulation Model
Abstract
abstractThe benefits of strategically balancing exploitation and exploration are well documented in the literature. Nonetheless, many firms tend to overemphasize exploitation efforts, a situation commonly referred to as the ‘success trap’. Previous studies have attributed this behaviour to managerial incompetence or myopia. However, some management teams appear to adequately recognize the exploration need, while not being able to bring about the required strategic change. We draw on system dynamics modelling to investigate this phenomenon. A simulation model is developed and then the behaviour of a selected firm is replicated to uncover the underlying processes. As such, we develop a process theory of the success trap at the managerial level, coined the ‘suppression process’. This process theory describes and explains how the interplay between top managers, board members, and exploitation–exploration activities can trap the firm in the suppression of exploration.
Supplementary resource (1)
... To learn from this unsuccessful innovation process, we examine how managers of an SME dynamically (re)configured the interface between old and new businesses while exploring green innovations. The research strategy of this paper is to analyze exploratory innovation processes in a longitudinal process study (Huber and Van de Ven, 1995) in line with other ambidexterity scholars who have adopted this approach (Walrave et al., 2011;Tripsas, 2009;Khanagha et al., 2014). ...
... Learning from a case of failed exploration, this paper aims to examine the problems which occurred over time in managing the interface between the exploratory and exploitative business. In line with ambidexterity scholars who used the case study method (Adler et al., 1999;Tripsas and Gavetti, 2000;Walrave et al., 2011), the research strategy of this paper is to examine exploratory innovation processes and obstacles across value chain functions (research & development, production and sales & marketing), across various organizational levels (top-management, departments, individuals) as well as internal and external exploration (through alliances) in an in-depth longitudinal case study (Yin, 2014). ...
... According to (Yin, 2014), single case-studies are adopted for research that require an in-depth examination of a contemporary topic. Other authors including Adler et al. (1999), (Tripsas and Gavetti, 2000), Walrave et al. (2011) used this method to study the management of ambidexterity of time. While the larger part of the time frame of 10 years was subject to ex-post analysis, we were able to observe the last two years of the unfolding innovation process allowing us to collect first hand insights on the process. ...
The importance of firms to participate in sustainable development has been widely discussed in the literature. Yet, progress is still slow in light of the size and the urgency of the challenge. In terms of sustainability management, the challenge is to engage firms in sustainable development. This includes all firms, also SMEs that represent globally about 70% of pollution but have so far received less attention.
Sustainability-oriented innovation (SOI) in the form of new products that lessen negative environmental impact, or even create a positive impact on the environment and positive value for society can play an important role, particularly at established SMEs who see business opportunities in sustainable development and consider possible diversifications into new sustainability markets. Whereas the extant literature discusses what SOIs are and why firms develop them, little is known about how they are developed. To enable firms to innovate for sustainability, it is essential to know more about how SOI are developed. This process is considered as a very difficult one, with many firms failing.
The aim of this doctoral research project is to examine how SOIs dynamically unfold at SMEs and how they can be managed. Innovation processes at established SMEs are analyzed with the Fireworks innovation process model. The SOI specific challenges allow advances in the model to be achieved for this context.
The findings reveal that SOI unfolds is an emergent, somewhat chaotic way, that duration and outcome are uncertain, that the overall journey is composed of multiple intertwined innovation paths, of which several will likely lead to setbacks. Four practices can help manage this process: first, the creation of a dedicated organization unit for exploration, second intelligent learning for efficient exploration, third in-depth investigation of the related technological innovation system, and fourth careful planning of the integration into the core business for commercialization.
This research contributes to the SOI literature by advancing the Fireworks model and thereby proposing a model of how SOIs dynamically unfold. The model is both holistic and detailed, which opens several avenues for future research. Furthermore, the research contributes to management practice by providing a heuristic to manage SOI development at SMEs.
... In the domain of management science, many scholars and practitioners have looked into this tension between the exploitation of previous knowledge and the exploration of new avenues for producing new knowledge and organizational capabilities (Repenning and Sterman, 2002;Garcia et al., 2003;Walrave et al. 2011;Morrison, 2012;Rahmandad, 2012). Most studies have drawn upon this exploitationexploration tradeoff and James March's position that "central to a firm's survival over time is its ability to exploit existing assets and knowledge bases and simultaneously explore new systems of work and new technologies to improve organizational capabilities" (March, 1991). ...
... Some studies in balancing exploitation and exploration have looked into the role of uncertainty and dynamism of the environment in which organizations operate (Walrave et al., 2011). Their results indicated that environmental dynamism (e.g., information uncertainty, fluctuations of demands, changing competition) plays a significant role in the relative impact of exploitation and exploration; that is, dynamism favored continuing improvements in exploration where a greater impact of productivity could be achieved. ...
... Environmental dynamism (D) is a complex variable that refers to a range of situations where novel features and surprises exist, demands and resources fluctuate over time, it is uncertain how existing methods would work and so forth. Walrave et al. (2011) have presented elaborate indices of dynamism in the context of commercial organizational settings. In the present study, a simplified index (D) has been used to captured these situations in general, without elaborating further on the nature of dynamism. ...
In human factors and safety, the principle of Efficiency-Thoroughness-Tradeoff (ETTO book of Hollnagel, 2009) has stimulated a new perspective on how safety events may arise when organizations increase pressures at work to produce more, faster but with less resources. Several studies have provided evidence of the ETTO principle in healthcare, manufacturing, maintenance, maritime, aviation and air traffic control. This paper seeks to look deeper into the mechanisms and dynamics of ETTO by using a system dynamics approach of similar exploitation-exploration tradeoffs as applied in the context of management science. The model has looked into the dynamics of two variants of thoroughness, that is, compensation tactics and explorative strategies. Simulation trials with a system dynamics model have identified ‘tipping points’ where production challenges cannot be met by continuing to do more by exploiting existing resources. Results also indicate that exploration can become a source of organizational slack that can be traded in to increase capabilities and hence, productivity up to a certain point. ETTO situations have also been examined in conditions of environmental dynamism (e.g., information uncertainty, fluctuations of demands and borderline conditions) that affect the effectiveness of operations and long-term capabilities. Finally, the system dynamics model has looked into ways that exploration could be enhanced by means of articulation and learning. By using a simulation model, this article shows how quantitative modeling can provide additional insights into the ETTO principle.
... However, despite the relative conceptual consensus in recent literature that both exploration and exploitation should be seen as forms of search and adaptation, albeit of different types (Gupta et al., 2006;Lavie et al., 2010), the literature has frequently equated the tension between exploration and exploitation with the tension between adaptability and efficiency (e.g., Benner and Tushman, 2003;Adler et al., Winter, 2009;Posen and Levinthal, 2012). The emphasis of research on organizational ambidexterity has typically been on ensuring sufficient exploration in dynamic environments (e.g., Levinthal and March, 1993;Benner and Tushman, 2003;Siggelkow and Levinthal, 2003;Siggelkow and Rivkin, 2006;Walrave et al., 2011), and the conditions in which organizations need to conduct exploitative adaptation have received relatively little attention. ...
... In the organizational adaptation literature, adaptability is often, implicitly or explicitly, considered mainly as a problem of ensuring sufficient exploration (e.g., Levinthal and March, 1993;Benner and Tushman, 2003;Siggelkow and Levinthal, 2003;Adler et al., Winter, 2009;Walrave et al., 2011). This is exemplified in the review by Lavie et al. (2010: 116), who consider it a given that 'flexibility and change are associated with exploration, stability and inertia are associated with exploitation'. ...
... Although some scholars have argued that exploration and exploitation draw on different resources and antecedents and thus may not pose a direct tradeoff (Baum et al., 2000;Katila and Ahuja, 2002;He and Wong, 2004), conceptualizing the explorationexploitation balance as a resource allocation decision has two advantages. First, it is consistent with the generally accepted conceptualization of exploration and exploitation as two distinct organizational processes competing for scarce resources (March, 1991;Uotila et al., 2009;Lavie et al., 2010;Walrave et al., 2011). Second, even to the extent that exploration and exploitation may draw on different resources, organizations still make implicit or explicit choices between the two (March, 1991), and in formal modeling, conceptualizing the tradeoff as a resource allocation decision allows the direct comparison of the relative advantage of exploratory versus exploitative adaptation in different environmental contexts, abstracting away from potentially confounding factors such as resource specificity or conflicting organizational routines. ...
Using a simulation of organizational adaptation in turbulent and complex landscapes, I examine how the optimal balance between exploration and exploitation is influenced by the organization's task environment. I find that, contrary to conventional wisdom, increasing exploration relative to exploitation is not always the optimal response to increased environmental turbulence or complexity. Turbulence is found to have a curvilinear effect on the optimal share of exploratory versus exploitative adaptation, with the relative importance of exploitation greatest at moderate degrees of turbulence. While environmental complexity is found to have a generally positive effect on the optimal share of exploration, the effects of complexity and turbulence are found to interact and, jointly, to increase the relative importance of exploitative adaptation over exploratory adaptation. These findings suggest that the proper exploration–exploitation balance depends, in complex ways, on the pressures for global versus local adaptability posed by the interaction of turbulence and complexity.
... This one-sided managerial focus tends to result in the so-called "failure trap" (Levinthal and March, 1993;Andriopoulos and Lewis, 2009). On the other hand, a strong focus on exploitation might result in relatively certain returns but also discourages more radical learning, and is therefore likely to undermine the firm's adaptability (Teece et al., 1997;Benner and Tushman, 2003;Walrave et al., 2011). This phenomenon has been called the "success trap" (Levinthal and March, 1993). ...
... As a consequence, recessions provide few opportunities for accelerated firm growth. If these opportunities are not explored, a recession is likely to reinforce organizational decline (Walrave et al., 2011). Marketing scholars have long maintained that contractions, compared to expansions, present managers with the rare opportunity to boost their firms' market share and long-term profitability (O'Malley et al., 2011;Steenkamp and Fang, 2011). ...
... This decrease can give rise to a vicious feedback loop, in which the negative performance trend further deteriorates the alignment between environmental demands and the balance of attention to EE, which in turn accelerates organizational decline (Leonard-Barton, 1992;Levinthal and March, 1993). In responding to economic recessions and other external threats, senior managers frequently let their firms slip into such a trap (Schmitt et al., 2010;Walrave et al., 2011). In contrast, a vicious feedback loop is (far) less likely to develop in a recovery because of the general rise in output levels (Deleersnyder et al., 2004). ...
Data appendix to the article "Managerial attention to exploitation versus exploration"
... This one-sided managerial focus tends to result in the so-called "failure trap" (Levinthal and March, 1993;Andriopoulos and Lewis, 2009). On the other hand, a strong focus on exploitation might result in relatively certain returns but also discourages more radical learning, and is therefore likely to undermine the firm's adaptability (Teece et al., 1997;Benner and Tushman, 2003;Walrave et al., 2011). This phenomenon has been called the "success trap" (Levinthal and March, 1993). ...
... As a consequence, recessions provide few opportunities for accelerated firm growth. If these opportunities are not explored, a recession is likely to reinforce organizational decline (Walrave et al., 2011). Marketing scholars have long maintained that contractions, compared to expansions, present managers with the rare opportunity to boost their firms' market share and long-term profitability (O'Malley et al., 2011;Steenkamp and Fang, 2011). ...
... This decrease can give rise to a vicious feedback loop, in which the negative performance trend further deteriorates the alignment between environmental demands and the balance of attention to EE, which in turn accelerates organizational decline (Leonard-Barton, 1992;Levinthal and March, 1993). In responding to economic recessions and other external threats, senior managers frequently let their firms slip into such a trap (Schmitt et al., 2010;Walrave et al., 2011). In contrast, a vicious feedback loop is (far) less likely to develop in a recovery because of the general rise in output levels (Deleersnyder et al., 2004). ...
Managerial attention to exploitation and exploration has a strong influence on organizational performance. However, there is hardly any knowledge about whether senior managers need to adjust their distribution of attention to exploitation and exploration in response to major changes in demand patterns in their industry. Drawing on the analysis of a panel data set of 86 firms in the information technology industry exposed to an economic recession and recovery, we find that successfully navigating an economic downturn demands more managerial attention to exploration, while leveraging the subsequent upswing requires more attention to exploitation. As such, this study contributes to the literature by providing a dynamic perspective on ambidexterity: that is, senior managers need to redistribute their attention to exploration and exploitation, to effectively meet the changing environmental demands over time.
... We conduct a longitudinal process study (Huber and Van de Ven, 1995) of an established entrepreneurial firm which embarked towards exploring renewable energy technologies (RET). Our analysis follows an embedded case design with multiple levels of analysis (individuals, teams/functions, organisation, network partners), in line with studies from more conventional technological contexts (Walrave et al., 2011;Tripsas, 2009;Khanagha et al., 2014). The firm's diversification began with the owner-manager's universalism values and with a deliberate organisational separation to enable sustainability-oriented exploration of RET. ...
... 6 2240004.indd 6 24-Sep-22 12:19:10 P 24-Sep-22 12:19:10 P approach of other ambidexterity scholars (e.g., Khanagha et al., 2014;Tripsas, 2013;Walrave et al., 2011). We also follow Jelinek and Schoonhoven (1993) who emphasise the need to go "inside" the firm. ...
Sustainability is a key societal challenge and has become an opportunity for innovation. While start-ups are prone to enter such new territories, established companies are more hesitant to leave current trajectories and embrace uncertainty linked to sustainability-oriented exploration. We present a case of a conventional high-tech firm of an owner-manager whose strong values of universalism led him to initialise a sustainability-oriented diversification by exploring renewable energy technologies. Our longitudinal study uncovers how changes in ambidextrous organisational design and represented managerial values ultimately resulted in failed exploration. Our contribution is threefold: First, we link individual-level managerial values of universalism with organisational-level phenomena of sustainability-oriented exploration and diversification. Second, we contribute to bridging hitherto mostly separate bodies of literature on sustainability-oriented innovation and ambidexterity to better understand how conventional firms can deploy their technological capabilities for sustainability. Third, we conceptualise the “separation drift” as fading organisational separation resulting in exploration failure.
... Disruptions such as that caused by COVID-19 also increase the fluidity of work and organisations (Yeganeh, 2021), for entrepreneurs, fluidity produces complex environments, creating questions on how to re-establish stability when prior assumptions no longer apply (Stephens et al., 2020), the implications of change are uncertain, the likely effectiveness of responses is unclear when enacted (Denrell, 2003;Walrave, van Oorschot, & Romme, 2011), and new equilibriums are created (Meerow & Newell, 2015). Accordingly, this literature review focuses on how such disruption can be dealt with through resilience enhancing stages that are enabled by using effectual learning and effectual, and then causal, application resources. ...
... Again, the initial effectual response limited the time delay to understand the environment and implement this mode. In terms of environmental disruption, for market disruption the research provides support for the view that implications of change are uncertain and effectiveness of responses unclear until post-deployment (Denrell, 2003;Walrave et al., 2011). Further, in terms of causal rebuilding, challenges with regard to dynamic resilience of identifying if the new equilibrium is as viable as the original or previous equilibrium (Mithani, 2020), is indeed found to be met through decision-making founded on experience. ...
This research explores the underlying roles of effectuation and causation logic as they impact upon firm resilience in Small and Medium Sized Enterprises (SMEs) in the unprecedented disruption caused by Covid-19. Because Covid-19 provides a unique and powerful discontinuance to internal and external environments, it requires firm adaptation in a wide variety of areas, as they seek to find a new “normal”. Our study contributes to the literature by applying effectuation to understand how an SME can experiment and learn in the face of disruption, and then subsequently causally adapt their resources and networks to achieve resilient outcomes. It adds to knowledge about the interaction between effectual and causal logic, leading to a more nuanced explanation of how and why an SME might apply each logic when responding to disruption caused by Covid-19.
... We conduct a longitudinal process study (Huber and Van de Ven, 1995) of an established entrepreneurial firm which embarked towards exploring renewable energy technologies (RET). Our analysis follows an embedded case design with multiple levels of analysis (individuals, teams/functions, organisation, network partners), in line with studies from more conventional technological contexts (Walrave et al., 2011;Tripsas, 2009;Khanagha et al., 2014). The firm's diversification began with the owner-manager's universalism values and with a deliberate organisational separation to enable sustainability-oriented exploration of RET. ...
... Such process studies of individual organisations are important to unravel the underlying dynamics of a phenomenon (Siggelkow, 2007), particularly in the case of unsuccessful innovation projects (van Oorschot et al., 2013). We looked at the unfolding innovation processes at TechLtd and the dynamics involved in managing ambidexterity at the interface between the existing (conventional) and new (sustainability-oriented) businesses and thereby followed the methodological approach of other ambidexterity scholars (e.g., Khanagha et al., 2014;Tripsas, 2013;Walrave et al., 2011). We also follow Jelinek and Schoonhoven (1993) who emphasise the need to go "inside" the firm. ...
Sustainability is a key societal challenge and has become an opportunity for innovation. While start-ups are prone to enter such new territories, established companies are more hesitant to leave current trajectories and embrace uncertainty linked to sustainability-oriented exploration. We present a case of a conventional high-tech firm of an owner-manager whose strong values of universalism led him to initialize a sustainability-oriented diversification by exploring renewable energy technologies. Our longitudinal study uncovers how changes in ambidextrous organizational design and represented managerial values ultimately resulted in failed exploration. Our contribution is threefold: First, we link individual-level managerial values of universalism with organizational-level phenomena of sustainability-oriented exploration and diversification. Second, we contribute to bridging hitherto mostly separate bodies of literature on sustainability-oriented innovation and ambidexterity to better understand how conventional firms can deploy their technological capabilities for sustainability. Third, we conceptualize the "separation drift" as fading organizational separation resulting in exploration failure.
... As such, we subsequently drew on systems thinking, representing our findings in the form of a Causal Loop Diagram (CLD: Sterman, 2000), to arrive at a dynamic explanation of how academics evolved in their boundary spanning approach and ability over time (Fig. 3). CLDs originated in the system dynamics literature (Sterman, 2000) and have become common in management and organization studies (e.g., Dattée et al., 2018;Perlow et al., 2002;Van Oorschot et al., 2013;Walrave et al., 2011), to capture and explain feedback driven systems involving dynamic behavior over time (Lin et al., 2006;Stacey, 1993). We observed significant behavioral changes about halfway into the project. ...
... This implies scholars might start looking beyond (fixed) antecedents and assumed linear effects to explain academic engagement (outcomes), and consider more complex matters such as the dynamic learning behavior described in this study. In addition to applying CLDs, system dynamics modeling may prove a particularly valuable research method (see Sterman, 2000;Walrave et al., 2011). Furthermore, we expose ways development of boundary spanning abilities in the context of academic engagement might be traced. ...
Research on academic engagement and technology transfer or commercialization offers important insights into the relationship between characteristics, activities and abilities of individual academic researchers, with outcomes such as successful technology transfer and commercialization. In particular, the activity of boundary spanning proves central in the successful transfer and commercialization of university developed technologies. However, the process by which academic researchers become boundary spanners remains relatively unexplored. This investigation serves to shed new light on the matter. We draw on an in-depth case study of a large European publicly funded initiative, directed to stimulate industry adoption of a university-developed technology across Europe. Our rich dataset is a result of following the project from start to finish, triangulating from multiple sources over a three-year period. Our analyses offer novel insight into the role of perspective taking as a mechanism both enabling academics to understand knowledge boundaries faced during engagement activities and a critical input to developing and improving boundary spanning abilities. Our findings offer important implications for research on academic engagement and technology commercialization.
... As such, we subsequently drew on systems thinking, representing our findings in the form of a Causal Loop Diagram (CL : Sterman 2000), to arrive at a dynamic explanation of how academics evolved in their boundary spanning approach and ability over time (Fig. 3). CLDs originated in the system dynamics literature (Sterman 2000) and have become common in management and organization studies (e.g., Van Oorschot et al. 2013;Perlow et al. 2002;Walrave et al. 2011;Dattée et al. 2018), to capture and explain feedback driven systems involving dynamic behavior over time (Lin et al. 2006;Stacey 1993). We observed significant behavioral changes about halfway into the project. ...
... This implies scholars might start looking beyond (fixed) antecedents and assumed linear effects to explain academic engagement (outcomes), and consider more complex matters such as the dynamic learning behavior described in this study. In addition to applying CLDs, system dynamics modeling may prove a particularly valuable research method (seeSterman 2000;Walrave et al. 2011). Furthermore, we expose ways development of boundary spanning abilities in the context of academic engagement might be traced. ...
Research on academic engagement and technology transfer or commercialization offers important insights into the relationship between characteristics, activities and abilities of individual academic researchers, with outcomes such as successful technology transfer and commercialization. In particular, the activity of boundary spanning proves central in the successful transfer and commercialization of university developed technologies. However, the process by which academic researchers become boundary spanners remains relatively unexplored. This investigation serves to shed new light on the matter. We draw on an in-depth case study of a large European publicly funded initiative, directed to stimulate industry adoption of a university-developed technology across Europe. Our rich dataset is a result of following the project from start to finish, triangulating from multiple sources over a three-year period. Our analyses offer novel insight into the role of perspective taking as a mechanism both enabling academics to understand knowledge boundaries faced during engagement activities and a critical input to developing and improving boundary spanning abilities. Our findings offer important implications for research on academic engagement and technology commercialization.
... In contrast, the Kirznerian view is more linked to an economic perspective: entrepreneurs are able to see where a good can be sold at a higher price than that for which it can be bought (Busenitz, 1996). Walrave, van Oorschot, and Romme (2011) argued that volatile ecosystems require a more explorative (Schumpetarian) approach than calm ecosystems, and highly competitive markets require a more exploitative (Kirznerian) approach than more monopolistic markets. ...
... These expenses come from SMEs and large incumbent organizations (Tidd & Bessant, 2015), which are much more sensitive to market conjuncture (Verhoeven, Span, & Prince, 2015). Other industrial ecosystems are also experiencing increasing competitiveness (Dankbaar, Smals, & Vissers, 2014) which creates a greater need for exploration and innovation (Walrave et al., 2011). ...
Business innovation is a multidisciplinary area of expertise that bridges the gap between traditional fields of study such as business administration, organizational studies, marketing, arts, design, engineering and entrepreneurship. This article tries to formulate a definition for business innovation, proposes a framework for business innovation and sets the outlines of a competency framework for education programs in Business Innovation.
... Learning from a case of failed exploration, this paper aims to examine the problems which occurred over time in managing the interface between the exploratory and exploitative business. In line with ambidexterity scholars who used the case study method (Adler et al., 1999;Tripsas and Gavetti, 2000;Walrave et al., 2011), the research strategy of this paper is to examine exploratory innovation processes and obstacles across value chain functions (research & development, production and sales & marketing), across various organizational levels (top-management, departments, individuals) as well as internal and external exploration (through alliances) in an in-depth longitudinal case study (Yin, 2014). ...
... According to (Yin, 2014), single case-studies are adopted for research that require an in-depth examination of a contemporary topic. Other authors including Adler et al. (1999), (Tripsas and Gavetti, 2000), Walrave et al. (2011) used this method to study the management of ambidexterity of time. While the larger part of the time frame of 10 years was subject to ex-post analysis, we were able to observe the last two years of the unfolding innovation process allowing us to collect first hand insights on the process. ...
A central issue in innovation management is the undesirable spillover of harmful routines and cognitive representations from core business to the exploratory innovation space, as dealt with in ambidexterity research. This paper examines a conventional manufacturing SME in a business-to-business market that developed renewable energy technologies in the scope of a new business unit, but has ultimately failed in the market. The aim is to examine how the interface between the old and new business was managed over time. Using an in-depth qualitative longitudinal case study, we investigated innovation processes over time and identified three major sources of failure. First, an organizational separation drift from a textbook-like to a looser form of separation allows for undesirable spillover of routines cannibalizing the new business over time. Second, a mismatch exists between the intended product-market strategy and the actual product-market exploration. A third source of failure is the simultaneous coevolution of several modes of separation, which increases management complexity.
... Our results imply that TMTs, active in a specialized-supplier innovation pattern (Pavitt, 1984;Bogliacino and Pianta, 2016), need to be careful how to respond to positive performance feedback. That is, their 'natural' response to such feedback is to decrease innovation and distant search activities, which can trigger a vicious feedback loop where a limited innovation budget actually brings down organizational performance, which potentially hampers the firm's ability to innovate, ultimately resulting in the organization's demise (also see Walrave et al., 2011, for a rich description of such an innovation suppression process). For TMTs in a science-based innovation pattern, our results indicate rather slow, or delayed, response times to performance feedback. ...
Despite its strategic benefits, there is persistent heterogeneity across firms to what extent they engage in distant search activities. According to the default prediction of behavioral theory of the firm (BTF), poor past performance will increase a firm's propensity for distant search, whereas good performance will lead to a decrease. However, a contrasting view is taken within the emerging capability cue perspective, which predicts the opposite. To understand these conflicting views, we emphasize the key role of context that is formed by a firm's sectoral innovation pattern and shapes the dominant cognition of firms' managers. Building on this sectoral innovation perspective and Pavitt's seminal work (1984; 1995) we distinguish between a science-based innovation pattern (here, we focus on the semiconductor industry) and a specialized-supplier innovation pattern (we focus on the machinery industry). The key claim we make is that different sectoral innovation patterns shape other dominant managerial cognitions, leading to a different interpretation of past performance that influences the decision to increase or decrease distant search. Our paper contributes to an understanding of how the competing ideas on different ways in which firms respond to feedback, in view of distant search, can be reconciled. We also contribute to the literature on technological innovation by considering the role of managerial cognition and how differences therein can be associated with different firm choices on their distant search activities.
... The potential drawbacks of a conservative strategic posture are mostly associated to falling onto a 'success trap' (Levinthal & March, 1993). As firms develop greater competence in a given domain, they overemphasize exploitation efforts at the expenses of exploration investments (Walrave, van Oorschot, & Romme, 2011), which in the long run, may cause learning deficits (Baker et al., 2016) and thus, erode the firms' speed to market. In this setting, ambidexterity is crucial to reduce structural inertia and to preserve a certain degree of exploration within the firm Tuan, 2016). ...
This paper analyzes the influence of small and medium-sized enterprises' (SMEs) entrepreneurial orientation (EO) on its capacity to quickly introduce new products to the market (namely, speed to market). Specifically, we suggest that firms will exhibit greater speed to market when displaying either low or high levels of EO. We also suggest that the EO – speed to market relationship will be contingent on firms' ambidexterity, or its capacity to simultaneously embrace exploratory and exploitative strategies. To test our hypotheses, we collected survey data from 384 SMEs belonging to four sectors in Spain: biotechnology, ceramic tiles, toys and footwear. Our findings confirm the existence of a U-shaped connection between EO and speed to market, and evidence that this curvilinear relationship is accentuated when SMEs exhibit greater ambidexterity.
... Drawing on information from these interviews and discussions, we were able to develop a qualitative, participatory system dynamics model. Our model describes feedback mechanisms that enable or limit (Repenning & Sterman, 2002;Walrave et al., 2011) the possibilities of Chemelot's transformation into a cluster with zero GHG emissions. By means of a participatory system dynamics approach, we invited the participants to explore the potential feedback mechanisms of industrial clustering that are relevant to the implementation of deep emission reduction options in the Chemelot cluster. ...
Industrial clusters are considered more resource- and greenhouse gas-efficient than stand-alone industrial plants, but clustering may also act as a barrier to radical changes required for deep greenhouse gas emission reductions. Here we explore how clustering in an energy-intensive chemical industry cluster may influence attainability of the deep emission reduction targets. Chemelot, located in the southeast of the Netherlands, was willing to collaborate and we adopt a qualitative system dynamics approach based on expert interviews and group model building sessions. We found that clustering may hinder reaching deep emission reductions by three reinforcing feedback mechanisms, or ‘traps’, related to: incremental changes; short-term focus; and companies acting alone. The system dynamics analysis also identified potential mechanisms to escape from these traps, notably: (1) increasing cluster autonomy; (2) activating public support; (3) promoting changes in the supply chain; and (4) attracting long-term investors. The findings can inform policymakers on how to steer industrial clusters towards deep emission reductions, and support industrial cluster decision-makers on both internal and external strategies.
Key policy insights
• Industrial clustering may offer opportunities to accelerate deep greenhouse gas emission reductions, but it could also cause carbon lock-in because of increased physical and organizational interdependency, which favours incremental changes, short-term focus, and solitary actions rather than collective actions, at the cost of deep greenhouse gas emission reductions.
• To fully exploit the potential benefits of industrial clustering for greenhouse gas emission reductions, policies need to take into account the causal relations that operate in a self-reinforcing way to lock the cluster into high greenhouse gas emissions, and that can help escape them.
• A coordinating authority operating across the cluster is necessary to ensure effective collaboration within a chemical cluster so as to escape carbon lock-in.
• Policies addressing emissions along the full value chain (i.e. to include scope 3) might be mutually beneficial with the circularity and low-emission ambitions of the chemical industry.
... These schemes operate as different organizational decision making mechanisms driven by the changes of the different interdependent subunits. Walrave, van Oorschot, and Romme (2011) show how "success traps" appear in organizations. They built a system dynamics model with a nested set of causal relations that investigate the behavior of two interconnected investment levels: one in exploration, another one in exploitation. ...
Change is ubiquitous in the study of organizations. Organizational change is characterized by multiple perspectives, both conceptually and methodologically. Computational modeling efforts are not the exception. In this work, we aim to provide an analysis of computational modeling approaches to organizational change. For that, we first review published works that directly connect to developing knowledge in organizational change from a computational lens. Second, we offer an account of unexplored topics in computational organizational change. Last, we highlight the potentialities of computer simulation models based on agent interactions in regard to how they could contribute to the understanding of central issues in this organizational research subfield.
... Ambidexterity is likely to result in both short-and long-term performance gains as firms simultaneously refine and improve their existing products in relatable ways that customers value, and push boundaries with radical innovations that limit the risk of becoming locked into existing products (He & Wong, 2004;Vagnani, 2015). An ambidextrous orientation is positively associated with firm performance because it allows firms to effectively manage existing demands while also anticipating disruptive changes in their industries (Koryak et al., 2018;Mihalache et al., 2014;Walrave, van Oorschot, & Romme, 2011). ...
Chief Executive Officers (CEOs) are essential in driving firm innovation. However, despite existing research on CEO personality characteristics and firm innovation and performance, we know relatively little about how personality characteristics reflecting anticipatory action and strong outcome-oriented components, such as proactiveness, shape firm innovation and performance. We explore the relationship between CEO proactiveness and three facets of organizational innovation, as well as its impact on firm performance. We suggest that CEO proactiveness is manifested in different network-building, problem-solving, and feedback-seeking behaviors with different implications for exploratory innovation, exploitative innovation, and organizational ambidexterity, and that its effect on firm performance is partially mediated by organizational ambidexterity. By examining the influence of this important CEO personality characteristic on key firm strategic choices and performance, we extend research on strategic leadership and firm innovation and performance.
... Demand uncertainty (Chen et al. 2019) Demand uncertainly makes customers' understanding and profit potential critical, increasing TCOs' confidence to enact and interpret demand to TMT members and reach consensus on innovation adoption. Environmental competitiveness (Walrave et al. 2011) Intense competition, characterized by a large number of firms with similar market shares, efficiency, low prices, tight margins, and no slack, requires a focus on exploitation to achieve positive financial results. Environmental complexity (Li and Tang 2010;Tang et al. 2015) Competition and heterogeneity increase industry concentration and the number and interconnectedness of competitors, enhancing CEOs' discretion and attention to competition and collaboration. ...
Generating and implementing innovative ideas is a key organizational effort to achieve superior performance and secure competitive advantages. Accordingly, the influence of strategic leaders on organizational innovation is increasingly drawing research attention. In this study, we review and synthesize research on how strategic leaders (chief executive officers, top management teams, and boards of directors) influence innovation and propose a framework to guide future research on this important topic. We explain how existing theories rely on discretional or architectural mechanisms to explain strategic leaders’ influence on innovation and review how current studies relate strategic leaders to the specific stages of the innovation process. We also discuss the role of the internal and external environment in moderating these relationships and provide an overview and criticism of theoretical and methodological issues. Overall, we discuss the most relevant findings of the field, analyze how specific suggestions drawn from our framework can contribute to a comprehensive understanding of the influence of strategic leaders on innovation, and propose multiple research opportunities.
... Often these take the form of designing "what-if" experiments, which include system improvement and boundary-adequacy tests via creation of additional model structure (Forrester and Senge, 1980;Morecroft, 1988;Martinez-Moyano and Richardson 2013). What-if experiments are typically performed using ad hoc adjustments of key model parameters (e.g., Repenning, 2001;Walrave et al., 2011) as well as functional values, functional shapes, and forms of decision equations (Barlas 2007). Boundary-adequacy experiments are uniquely important because they test whether or not modification of the model boundary assumptions would change policy recommendations arrived at in the original analysis (Forrester and Senge 1980). ...
The use of dynamic systems models by scientists, managers, and policy-makers is becoming more common due to the increasingly complex nature of ecological and socioeconomic problems. Unfortunately, most scientific training in the life sciences only includes dynamic modeling as elective, supplementary courses at a beginners-level, which is not conducive to generating the expertise needed to properly develop, test, and learn from dynamic modeling approaches and risks utilization of poor quality models and adoption of unreliable recommendations. The objective of this paper is to fill part of that gap, particularly regarding model experimentation , by summarizing key concepts in experimental design for simulation experiments and illustrating hands-on examples of experiments needed for developing a deeper understanding of complex, dynamic systems. The experiments include extreme conditions testing, sensitivity analyses of model behaviors given variation in both parameter values and graphical (table) functions, and "what-if?" experiments (e.g., counterfactual trajec-tories, boundary-adequacy tests, and intervention threshold experiments). Each experimental example describes the theoretical foundation of the test, illustrates its application using an ecological systems model, and increases in degree of difficulty from novice to advanced skill levels. By doing so, we demonstrate consistent, scientific means to glean valuable insights about the model's structure-behavior link, uncover any unforeseen model flaws or incorrect formulations, and enhance the confidence (validity) of the model for its intended use.
... To learn from this unsuccessful innovation process, we examine how managers dynamically (re)configured the interface between old and new businesses while exploring green innovations. The research strategy of this paper is to analyze exploratory innovation processes in a longitudinal process study (Huber and Van de Ven, 1995) across multiple levels of analysis (individuals, teams/functions, organization, network partners) in line with other ambidexterity scholars who have adopted this approach (Walrave et al., 2011;Tripsas, 2009;Khanagha et al., 2014). Overall, we contribute to theory and practice by linking innovation failure to pitfalls occurring in the management of ambidexterity and related organizational design. ...
The ambidexterity literature suggests radical innovation is driven by preventing the undesirable spillover of routines and cognitive representations from the exploitative core business to the exploratory innovation space. This paper presents a longitudinal process study uncovering the anatomy of an unsuccessful exploration of green technologies by a medium-sized entrepreneurial firm. We investigated their innovation processes to understand how the managers configured and reconfigured the exploration-exploitation interface over time by using various modes of balance. The paper contributes to ambidexterity theory by identifying three separation pitfalls. First, a 'separation drift' from a textbook-like to a looser form of organizational separation allows for the undesirable spillover of routines which cannibalize the new business over time. Second, a mismatch can occur between the intended product-market strategy and the actual product-market exploration. A third pitfall increases management complexity due to the simultaneous use of several modes of balance originally perceived as a more resource-efficient alternative to a clear-cut organizational separation.
... This may facilitate experimentation and increase the ability to pursue risky innovation projects (Chen, 2008;Nohria and Gulati, 1996). Slack may also decrease the pressure for short-term performance from shareholders (Walrave et al., 2011). As a result, CEOs with a research orientation and slack resources are able to better pursue their innovative ideas and research. ...
This study develops and tests a comprehensive framework that explains what, when, and how CEO characteristics influence firms’ innovation outcomes in R&D‐intensive industries. Empirical evidence from 109 CEOs from 87 U.S.‐based pharmaceutical firms over the period 2001–2013 reveals that research‐oriented CEOs – those with ability and motivation for science and technology – increase their firms’ innovation outcomes. The results indicate that the CEO–innovation relationship strongly depends on the extent of CEOs’ managerial discretion, which is shaped by the organizational context. We contribute to a more comprehensive understanding of the role of CEOs in firms´ innovation performance differentials.
... This recent integration of literature streams has provided a broader outlook on the organizational and managerial mechanisms for dealing with exploitation or exploration and other organizational dualities. Originally, March (1991) proposed exploration and exploitation to be two contradictory activities that can be considered as two ends of a same continuum that are competing for scarce resources and are technically incompatible (see also Walrave et al., 2011). However, this does not apply to all resources. ...
... Prior studies have, for instance, used CATA analysis to capture firms' endeavors in exploitation and exploration (e.g. Uotila et al. 2009;Vagnani, 2015;Gatti, Volpe and Vagnani, 2015;Titus et al., 2014;Walrave et al., 2011;Heyden et al., 2014) and entrepreneurial orientation (e.g. Short et al. 2010;Boling et al., 2016;Engelen et al., 2016;Wolfe and Shepherd, 2015). ...
This paper demonstrates the potential of computer-aided text analysis (CATA) as a technique to operationalize hard-to-measure constructs in international business research, provided that a rigorous set of validity tests is applied. CATA allows performing content analyses on large textual databases by constructing indicators using deductively and inductively derived keywords. We show the critical validity steps that have to be followed to arrive at valid CATA indicators. We illustrate the CATA technique through an application to the concept of global mindset, which has received substantial attention in the international business and strategy literature. We conclude that CATA analysis is a valuable method for international business research, but that its potential can only be unleashed with proper procedures and due attention to construct validity.
Keywords: content analysis, computer aided text analysis (CATA), global strategy, multinational firms, global mindset
... This recent integration of literature streams has provided a broader outlook on the organizational and managerial mechanisms for dealing with exploitation or exploration and other organizational dualities. Originally, March (1991) proposed exploration and exploitation to be two contradictory activities that can be considered as two ends of a same continuum that are competing for scarce resources and are technically incompatible (see also Walrave et al., 2011). However, this does not apply to all resources. ...
... In times characterized by transitions in the industry, firm executives may need to creatively destroy the present source of their success to come up with better ideas, better products and better solutions that will build the success of tomorrow. Also, Walrave et al. (2011) proposed that exploitation and exploration are conflicting elements, given that the companies' resources are limited and that devoting resources to exploitation will thus directly decrease the resources that can be dedicated to exploration. Gupta et al. (2006) suggested that both exploration and exploitation refer to learning but to different degrees or types of learning and that, depending on whether the focus is on one domain or many, exploration and exploitation take the form of two ends of a continuum. ...
... Some theoretical SD research projects have the objective to provide an explanation for an observed instance of a phenomenon and for such studies collecting data is an important element (e.g., Rudolph et al., 2009;Walrave et al., 2011;Rahmandad and Repenning, 2016), but this does not necessarily need to be the case. Since data might not-or only to a limited degree-be available, there are many examples of theoretical SD studies that do not use data (e.g., Sastry, 1997;Sterman and Wittenberg, 1999;Gary, 2005;Rahmandad, 2012). ...
... This link opens up several opportunities for future research. If indeed being a stakeholder firm may be understood in terms of exploitation and exploration, this might imply that stakeholder firms might outperform traditional firms specifically in those industries that are characterized by high competitiveness and dynamism, because these are the industries in which firms focusing on exploration outperform those that focus on exploitation (Walrave, Van Oorschot, and Romme, 2011). Moreover, it might imply that stakeholder firms, like ambidextrous firms, might benefit from 'transformational leadership' if they simultaneously have the aim to gradually improve their existing products and services (Jansen, George, Van den Bosch, and Volberda, 2008). ...
Work in progress, please do not cite without permission of the authors More and more firms aim to adopt a stakeholder approach and firms that succeed have been called stakeholder firms. Instead of focusing on shareholder value, these firms try to simultaneously satisfy the needs of various stakeholders. Becoming a stakeholder firm however may come with challenges. While scholars have been debating conceptual aspects of the stakeholder approach, this study instead looks at real-world barriers that firms may encounter when in transition to becoming a stakeholder firm. To be able to understand the full complexity of this transition, this study aims to identify barriers on the level of the individual, the firm, and the system. Evidence comes from a case study of a firm in such a transition. Based on 26 interviews, we identify seven barriers, followed by a discussion of the implications of these results for stakeholder theory, the scientific domain that studies the stakeholder approach.
... Considering the complex and dynamic nature of electricity systems, System Dynamics has been reported as an appropriate analysis methodology in the sector already in 2006 (Schwaninger, 2006). System Dynamics provides an understanding of changes focusing on the interaction between physical flows, information flows, delays and policies that capture the dynamic interrelations among the system's variables, that can guide future policy-making (Romme, 2004;Walrave et al., 2011). The structural elements in System Dynamics are the causal loop diagrams. ...
The aim of this research is to provide a comprehensive analysis framework for fostering the transition of electricity systems towards sustainability and energy security. In this sense, we first provide a critical taxonomy of extant studies, as these are mapped on strategic, tactical and operational levels of the hierarchical decision-making process. Sustainability constituents along with the considered supply or demand viewpoints are also mapped. Following, we recognize and classify the major elaborated performance metrics used to monitor and assess the sustainable performance of electricity systems. We then integrate the recognized decision-making process with the physical systems’ perspective to demonstrate the complex and dynamic nature of the electricity systems. Our critical analysis reveals that sustainability and energy security are rapidly evolving research fields; however, the often myopic perspective of the reviewed studies hinders the effective evaluation and analysis of renewable energy systems. Our analysis further allows for the identification of gaps and overlaps in literature, as well as of future research areas.
... Besides managerial cognition, the dynamic interplay of different organizational entities has been found to contribute to success traps. Walrave et al. (2011) use system dynamics modeling to investigate the interplay between top managers, board members, and exploitation-exploration activities, concluding that on the managerial level external pressures to exploit (e.g. from board or stakeholders) bring about a suppression effect of exploration despite the awareness of its need. ...
... Where conceptual virtual laboratories may fully rely on earlier research, phenomenon driven explanations gather empirical data to test their dynamic theory. It is a 'history-friendly approach' in that it "serves to map the evolution of a specific empirical case against the developmental predictions drawn from a model" (Walrave et al. 2011(Walrave et al. , p. 1732. Compared to qualitative approaches, developing a formalized model provides a tool that helps providing a "bridge between thick description and broader theoretical generalizations" (Black et al. 2004, p. 605). ...
There is an increasing attention for dynamic organizational theories. The system dynamics methodology, although originally developed for practical contributions, is increasingly used to develop dynamic theoretical contributions. However, these studies differ substantially in the research designs they apply. Some of these studies adopt a quantitative approach while others adopt a qualitative approach. Some of these studies focus on testing existing theories, while other studies focus on building theory or combine both theory testing and building. This variety hinders an effective understanding of the methodology. To increase clarity, this paper provides a systematic review of system dynamics based theoretical contributions in organizational theory between 1990 and 2016. By looking at differences and commonalities I show how various methodological decisions combine into three distinctive internally consistent system dynamics based research strategies for theoretical contributions. These results support making methodological decisions in future research designs when applying system dynamics to develop dynamic organizational theories.
... In this respect, each research method has its strengths and weaknesses. For instance, system dynamics (SD) models produce feedback-driven explanations of complex system behaviour (Schwaninger, 2006) and are instrumental in investigating multiple interacting processes and feedback loops, time delays, and other non-linear effects (Romme, 2004;Rudolph & Repenning, 2002;Walrave, Van Oorschot, & Romme, 2011). Moreover, SD models can be used to combine qualitative and quantitative aspects of a dynamic phenomenon (Sterman, 2000). ...
Combining system dynamics (SD) modelling with other research methods serves to articulate complex problems and explore potential solutions and policies. A growing number of studies draw on SD in combination with at least one other method, but there is hardly any knowledge about why, when, and how to make such combinations. We address this gap by conducting a systematic literature review of studies that have combined SD with at least one other method. Our findings are synthesised in an evidence-based framework that demonstrates why, when, and how SD is combined with other methods. This framework provides a point of reference for those who want to go beyond stand-alone SD modelling. In addition, this paper contributes to the multi-methodology literature by consolidating an area in which substantial experience in combining methods has been gained.
... Y. Yan, J. Guan Technological Forecasting & Social Change 126 (2018) 244-258 alternatives and resource (March, 1991;Walrave et al., 2011). Depending on weak ties theory (Granovetter, 1973), information benefits obtained through such frequent interactions are more likely to be repeated and redundant. ...
... Prior studies have, for instance, used CATA analysis to capture firms' endeavors in exploitation and exploration (e.g. Uotila et al. 2009;Vagnani, 2015;Gatti, Volpe and Vagnani, 2015;Titus et al., 2014;Walrave et al., 2011;Heyden et al., 2014) and entrepreneurial orientation (e.g. Short et al. 2010;Boling et al., 2016;Engelen et al., 2016;Wolfe and Shepherd, 2015). ...
Research summary
This article demonstrates the potential of computer‐aided text analysis ( CATA ) as a technique to operationalize hard‐to‐measure constructs in international business research, provided that a rigorous set of validity tests is applied. CATA allows researchers to perform content analyses on large textual databases by constructing indicators using deductively and inductively derived keywords. We show the critical validity steps that have to be followed to arrive at valid CATA indicators. We illustrate the CATA technique through an application to the concept of global mind‐set, which has received substantial attention in the international business and strategy literature. We conclude that CATA analysis is a valuable method for international business research, but that its potential can be unleashed only with proper procedures and due attention to construct validity.
Managerial summary
With the increasing availability of large textual databases such as collections of press releases, newswire archives, and SEC filings, computer‐aided text analysis ( CATA ) creates new opportunities to analyze otherwise unobserved firm and managerial traits. CATA can be applied to a broad range of firm activities and industries across long time periods, while eschewing the low response rates typical for surveys. In this article, we demonstrate the critical validity steps that have to be followed to arrive at valid CATA indicators of firm and managerial traits, with an application to international business. As an empirical illustration, we build a keyword‐based indicator of firms' global mind‐sets using a large dataset of news articles. Copyright © 2017 Strategic Management Society.
... By developing an ability to continuously reorganize assets for value creation, managers enhance the potential of a resource to be rebundled or repurposed when environmental conditions change (O'Brien & Folta, 2009). Indeed, prior studies suggest that asset management capability may be "especially critical in times of decline, when uncertainty and ambiguity tend to be (unusually) high" (Walrave, van Oorschot, & Romme, 2011: 1739. ...
As the likelihood of worldwide crises increases due to globalization and the resulting economic contagion, understanding why some multinational enterprises (MNEs) prevail in such environments becomes ever more critical. Drawing from the concept of dynamic managerial capabilities, we posit that MNE in-crisis performance is associated with the pre-crisis development of asset management capabilities, or the capacity of managers to orchestrate assets so as to extract more value from the firm’s resource pool. Specifically, we argue that because dynamic managerial capabilities evolve as a response to a firm’s task environment, MNEs that operate in dynamic industries develop stronger asset management capabilities. However, we also posit that whether these capabilities contribute to in-crisis performance is contingent upon the munificence of the industry environment in which the capability evolves. Asset management capabilities that evolve in munificent environments would encompass a wider spectrum of routine-altering activities, and thus increase the ability of the MNE to react to more revolutionary events, such as global economic crises. Conversely, asset management capabilities that evolve in resource-scarce environments will result in more strategic lock-in due to firms' constrained ability to experiment with novel resource configurations, resulting in poorer in-crisis performance. We test our hypotheses using a sample of 854 MNEs in the context of the global financial crisis of 2008, and find support for our hypotheses. We discuss implications for the dynamic capabilities view and MNE resilience.
... These instances are likely to face significantly different selection pressures than those pioneering an innovation outside the dominant regime though. The case of Kodak that invented digital photography but then decided not to commercialize it (Tripsas and Gavetti, 2000) suggests incumbents of the prevailing regime may face more severe corporate 'selection environments' (Walrave, Van Oorschot, and Romme, 2011), even when their external environment is less selective. This raises interesting questions with regard to path-breaking innovation by focal firms that are incumbents to the prevailing regime versus those that are not. ...
Path-breaking innovations are increasingly developed and commercialized by networks of co-creating actors, called innovation ecosystems. Previous work in this area demonstrates that the ‘internal’ alignment of actors is critical to value creation in the innovation ecosystem. However, the literature has largely overlooked that the success of an innovation ecosystem also depends on its ‘external’ viability, determined by the broader socio-technical environment. That is, path-breaking innovations inherently challenge the prevailing socio-technical regime in a domain (e.g., established rules, artifacts and habits) that tends to be resistant to change. Overcoming this resistance is a major challenge for ventures pioneering path-breaking innovations. The paper contributes to the literature on innovation ecosystems by explicitly considering the socio-technical viability of the innovation ecosystem around a path-breaking innovation. In particular, we theorize about the objects of manipulation in an innovation ecosystem and discuss the strategies that a focal venture, orchestrating the innovation ecosystem, can employ in manipulating these objects so as to increase the socio-technical viability of the ecosystem. We arrive at a multi-level perspective on innovation ecosystem development that integrates internal alignment and external viability and informs a research agenda for future studies in this field.
Corporations are currently confronting major, interlocking crises, including climate change, biodiversity loss, inequalities, and social isolation. When under threat, executives tend to focus inward and on the short term. This is particularly unfortunate because it is in such crises that executives need to see beyond the here and now in order to ride the storms. In this paper, we argue that corporate purpose helps organizations fight such myopia and offer four mechanisms through which this works: exposing new insights, seeing issues holistically, helping to sustain focus, and bringing unity and direction.
Funding: The authors acknowledge the generous funding from the Social Sciences and Humanities Council of Canada [Grant 895-2015-0026] that contributed to the broader project in which these ideas were generated.
According to the ambidexterity literature, organizations tend to favor either exploration or exploitation activities. However, few studies have elucidated why this imbalance occurs, what the ideal balance is, and how to remedy any disparities between what organizations tend to do and what they should do. This study addresses this paucity by situating these questions in the context of environmental conditions (static or dynamic) and organizational conditions (simple or complex) through a strategic fit paradigm lens. We systematically reviewed 20 years of exploration–exploitation research and developed an empirically grounded, contextually relevant framework that describes four organizational archetypes: the Kangaroo, Lion, Mouse, and Camel archetypes. We found that it often makes sense for organizations to be off-balance and identified the factors that cause imbalance and the strategies that managers can employ to manipulate the exploration–exploitation mix according to their organizations’ specific archetypes. By incorporating all three questions and delineating between organizational archetypes, this systematic review brings together the fragmented literature and provides a novel framework for advancing research and influencing managerial practice.
Increasingly, the development of today’s “smart” products requires the integration of both software and hardware in embedded systems. To develop these, hardware firms typically enlist the expertise of software development firms to offer integrated solutions. While hardware firms often work according to a plan-driven approach, software development firms draw on Agile development methods. Interestingly, empirically little is known about the implications and consequences of working according to contrasting development methods in a collaborative project. In response to this research gap, we conducted a process study of a collaborative development project involving a software firm and a hardware firm, within which the two firms worked according to contrasting development methods. We found that the software firm was gradually compelled to forgo its Agile method, creating a role conflict in terms of its way of working. As such, our results contribute to the literature on Agile–Stage-Gate hybrids by demonstrating how, in collaborative embedded systems development, hybridization of development methods may cause projects to fail. Our main practical implication entails the introduction of the “sequential Agile approach.”
This study examines the effects of competitive pressure by new entrants and technological discontinuity on the strategic innovations adopted by incumbent state-owned enterprises (SOEs) in India. Due to government ownership, these firms are dominant players domestically and their market leadership is challenged by new entrants. Technological discontinuity challenges technology leadership. Incumbent firms develop knowledge networks by working with partners, suppliers, and buyers. The incumbent firms must strike a balance between the exploitation of current technology and the exploration of new technology. This study aims to understand the effect of new entrants and technological discontinuity on the exploitation and exploration strategies of Indian SOEs in the manufacturing sector. The quantitative analysis is carried out using partial least squares structural equation modeling. For Indian SOEs, the technological discontinuity does affect exploitation and exploration, but new entrants have no such effect. The study confirms the moderating effect of knowledge networks on exploitation.
Research Summary
Behavioral theory examines how the intensity of underperformance influences firms’ strategic decisions; yet, it largely fails to consider the effect of underperformance duration. Drawing on behavioral theory and organizational learning, we argue that the length of time that a firm has been underperforming contributes to shaping firms’ innovative search patterns. We test our theory merging COMPUSTAT and NBER patent data for 1,610 high‐tech manufacturing companies between 1986 and 2006. Our results largely support our predicted curvilinear relationships. We find that innovative search magnitude and scope each first decreases and then increases with underperformance duration. In addition, we find marginal evidence that innovative search depth first increases and then decreases with underperformance duration. The statistical and practical significance of the results is also discussed.
Managerial Summary
Innovation is vital for a firm's survival and competitive advantage and requires a search for knowledge. Previous research suggests that the gap between current performance and desired performance is an important trigger for firms' innovative action. We suggest that how long the firm has been underperforming also plays an important role in firm innovation. Using financial and patent data on public high technology manufacturing firms, we show that there are non‐linear relationships between the duration of a firm's underperformance and its innovative activities. We find that underperforming firms first decrease and then increase R&D spending and the use of new knowledge as underperformance prolongs. Our results imply that underperforming firms face competing short and long term pressures that influence the nature of its innovative activities.
In recent years, organizational project management (OPM) has emerged as a field focused on how project, program and portfolio management practices strategically help firms realize organizational goals. There is a compelling need to address the totality of project-related work at the organizational level, providing a view of organizations as a network of projects to be coordinated among themselves, integrated by the more permanent organization, and to move away from a focus on individual projects. This comprehensive volume provides views from a wide range of international scholars researching OPM at a cross-disciplinary level. It covers concepts, theories and practices from disciplines allied to management, such as strategic management, organization sciences and behavioural science. It will be a valuable read for scholars and practitioners alike, who are looking to enrich their understanding of OPM and further investigate this new phenomenon.
The purpose of this study was to examine how women's career stage and Ubuntu (collectivist) values relate to their cognitive ambidexterity when pursuing entrepreneurial initiatives in multicultural South Africa. In this study individual cognitive ambidexterity was operationalised as using effectual and causal logic. More than three hundred businesswomen from diverse backgrounds were surveyed. The results revealed that career stage, self-efficacy and Ubuntu collectivism are important in women's ambidexterity. Mature, efficacious women in their late career stage draw on their diverse networks and use effectual affordable loss, flexibility and causation when pursuing entrepreneurial initiatives. In contrast, younger, early-career women are more likely to use pre-commitment to ensure support from stakeholders. Women with Ubuntu values use their relationship skills to draw on resources from their networks and use ambidexterity (effectual and causal logic) in their entrepreneurial endeavours. The findings suggest that entrepreneurial women who develop their cognitive ambidexterity and draw on both effectual and causal approaches when initiating entrepreneurial initiatives are more likely to experience successful outcomes. These mental approaches can be developed by means of awareness, training and mentoring. This study extends the literature on women's entrepreneurial decision-making in a culturally diverse society, demonstrating the influence of cultural values and career stage on effectual and causal logic.
This book constitutes the thoroughly refereed proceedings of five international workshops held in Ljubljana, Slovenia, in conjunction with the 28th International Conference on Advanced Information Systems Engineering, CAiSE 2016, in June 2016.
The 16 full and 9 short papers were carefully selected from 51 submissions.
The associated workshops were the Third International Workshop on Advances in Services DEsign based on the Notion of CApabiliy (ASDENCA) co-arranged with the First International Workshop on Business Model Dynamics and Information Systems Engineering (BumDISE), the Fourth International Workshop on Cognitive Aspects of Information Systems Engineering (COGNISE), the First International Workshop on Energy-awareness and Big Data Management in Information Systems (EnBIS), the Second International Workshop on Enterprise Modeling (EM), and the Sixth International Workshop on Information Systems Security Engineering (WISSE).
The ubiquitous practical relevance of system dynamics makes it easy to overlook the scientific impact that system dynamics has had. Studies on building theory with simulations suggest that there are very different ways of arriving at a theoretical contribution, which brings up the question how system dynamics is used to arrive at theoretical contributions. This paper provides a systematic review of system dynamics based theoretical contributions in management theory between 1990 and 2016. The results help pointing out which ways have proven to be specifically helpful for contributing to theory with system dynamics, and which opportunities for the future still exist.
Introduction Leadership is an interpersonal, person-oriented, social influence (Endres & Weibler, 2016), which guides in direction, course, action, and opinion (Bennis & Nanus, 1985). To that end, it is different from management, which is task oriented in the sense of bringing about or accomplishing something, being responsible for, or conducting something (Bennis & Nanus, 1985). Leadership requires a leader, but leaders do not operate in a vacuum, nor do they need to be formal managers. For a long time, the terms “leader,” “leadership” and “manager” were used almost interchangeably, and only recently has there been a distinction in their use (Alvesson & Sveningsson, 2003; Crevani et al., 2010). The development of leadership research over the years has also focused on different aspects of leadership, ranging from an interest in the traits, characteristics, and competencies of individual leaders, to an interest in how leadership is practiced in social settings by leaders, co-leaders, and followers in interaction (Carroll et al., 2008). Recent years have brought much insight about the importance of leadership as a complement to management in projects and has added a variety of perspectives to leadership. Examples include the traditional view of project and program managers as leaders and their associated leadership styles. This person-centric perspective has addressed the particular leadership styles of these roles (e.g., Keegan & Den Hartog, 2004) as well as personal characteristics that bring about certain leadership styles (e.g., Dulewicz & Higgs, 2005). We call this the vertical leader and his or her leadership style. Other research has looked at leadership that emerges from teams or individuals in a team and complements the leadership of the vertical leader. Examples of this include the studies on shared leadership (Pearce & Conger, 2003; Crevani et al., 2007) and its related processes (e.g., Cox, Pearce, & Perry, 2003). We call this approach the horizontal leader and his, her or their leadership style. Most recently, researchers have started to investigate the balance and situational contingency of vertical and horizontal leadership in projects. They showed the particular circumstances under which vertical leaders in projects make way for horizontal leaders to temporarily partake in leading the project (e.g., Müller et al., 2016). We call this balanced leadership, i.e., a situation in which the balance between vertical and horizontal leadership is appropriate.
This article proposes that a failing organization goes through a sequence of four stages before finally landing in the morass of death. A four-stage model is proposed to describe this journey, which can lead to failure or to turnaround. By categorizing the elements of failure or turnaround, the model explains how the elements germane to each stage, when combined, facilitate the progression of an organization from crippling deterioration in performance to eventual death or to re-stabilizing survival. To support our contention, we focus on the Canadian retail industry, and specifically on the story of the once very successful but now extinct merchandising icon T. Eaton Co. Ltd., contrasting its fortunes with those of fellow Canadian retail survivors Hudson's Bay Company and Canadian Tire. (c) 2005 Elsevier Ltd. All rights reserved.
Organizational decline has not been adequately examined by organizational scientists, because they are preoccupied with organizational growth and its consequences. The emphasis on growth reflects actual organizational conditions and the prevailing ideology in our society. However, predictions of an emerging era of retrenchment imply a need to study the management of organizational decline. In this paper, I propose an agenda of research, teaching, and consulting activities to rectify our neglect of this topic.
This study clarifies the meaning and conceptual domain of organizational decline by delimiting it operationally from the related constructs of turbulence, stagnation, and environmental decline. We investigated organizational attributes commonly associated in the literature with organizational decline and turbulence. These attributes, including increased conflict, turnover, resistance to change, centralization, scapegoating of leaders, and so on, were investigated in 334 institutions of higher education, along with objective measures of their patterns of decline and turbulence over a six-year period. Results suggest that organizational attributes (e.g., centralization) associated with the actions of top managers are significantly affected by turbulence but not by decline. Organizational attributes (e.g., scapegoating) associated with the actions of organization members who are not top managers are significantly affected by decline but not by turbulence. One implication is that different sources of uncertainty may have differential effects on organizations and that loosely coupled structures may not, therefore, always be effective in buffering the technological core from decline-induced uncertainty.
Exploration and exploitation have emerged as the twin concepts underpinning organizational adaptation research, yet some central issues related to them remain ambiguous. We address four related questions here: What do exploration and exploitation mean? Are they two ends of a continuum or orthogonal to each other? How should organizations achieve balance between exploration and exploitation-via ambidexterity or punctuated equilibrium? Finally, must all organizations strive for a balance, or is specialization in exploitation or exploration sometimes sufficient for long-run success? We summarize the contributions of the work in this special research forum and highlight important directions for future research.
This article examines the role that the quantity of non-novel events plays in precipitating disaster through the development of a formal (mathematical) system-dynamics model. Building on existing case studies of disaster, we develop a general theory of how an organizational system responds to an on-going stream of non-novel interruptions to existing plans and procedures. We show how an overaccumulation of interruptions can shift an organizational system from a resilient, self-regulating regime, which offsets the effects of this accumulation, to a fragile, self-escalating regime that amplifies them. We offer a new characterization of the conditions under which organizations may be prone to major disasters caused by an accumulation of minor interruptions. Our analysis provides both theoretical insights into the causes of organizational crises and practical suggestions for those charged with preventing them.
Whether an organization has a certain capability is often a matter of degree. Thus, in the context of initial learning of a capability, there is generally no clear-cut or automatic answer to the question of when an organization should be expected to cut back its learning efforts and affirm that the desired capability has been achieved. This paper offers a simple conceptual model for this question, based on the satisficing principle. More specifically, the question addressed is: ‘When does overt learning stop?’—where ‘overt’ learning is understood as being marked by observable allocation of attention and resources to the task of acquiring the capability. The model provides the framework for a discussion of various influences on the aspiration level in the satisficing model, and hence on the nature of the capability that has been achieved when learning stops.Overt learning efforts may be resumed at some time later if external factors operate to lift aspiration levels relevant to the capability. The paper discusses how such ‘re-ignition’ of learning may occur as a result of an organizational crisis, or of the institution of a quality management program. Copyright © 2000 John Wiley & Sons, Ltd.
What distinguishes between success and failure as organizations respond to turbulent environments? This article demonstrates that the most successful firms evolve through periods of incremental change, punctuated by discontinuous, organization-wide transformations. While the most successful firms initiate these strategic reorientations prior to competition, mediocre firms initiate these changes only after performance crises, and failing firms are caught by inertia and never initiate reorientations. This article discusses the roots of organization inertia, the necessity for both convergent and frame-breaking change, and the role of the senior management team in initiating and implementing frame-breaking change.
This paper explores the case for a general threat-rigidity effect in individual, group, and organizational behavior. Evidence from multiple levels of analysis is summarized, showing a restriction in information processing and constriction of control under threat conditions. Possible mechanisms underlying such a multiple-level effect are explored, as are its possible functional and dysfunctional consequences.
This paper investigates interrelationships of product design, organization design, processes for learning and managing knowledge, and competitive strategy. This paper uses the principles of nearly decomposable systems to investigate the ability of standardized interfaces between components in a product design to embed coordination of product development processes. Embedded coordination creates ‘hierarchical coordination’ without the need to continually exercise authority—enabling effective coordination of processes without the tight coupling of organizational structures. We develop concepts of modularity in product and organization designs based on standardized component and organization interfaces. Modular product architectures create information structures that provide the ‘glue’ that holds together the loosely coupled parts of a modular organization design. By facilitating loose coupling, modularity can also reduce the cost and difficulty of adaptive coordination, thereby increasing the strategic flexibility of firms to respond to environmental change. Modularity in product and organization designs therefore enables a new strategic approach to the management of knowledge based on an intentional, carefully managed loose coupling of a firm's learning processes at architectural and component levels of product creation processes.
This article proposes that a failing organization goes through a sequence of four stages before finally landing in the morass of death. A four-stage model is proposed to describe this journey, which can lead to failure or to turnaround. By categorizing the elements of failure or turnaround, the model explains how the elements germane to each stage, when combined, facilitate the progression of an organization from crippling deterioration in performance to eventual death or to re-stabilizing survival. To support our contention, we focus on the Canadian retail industry, and specifically on the story of the once very successful but now extinct merchandising icon T. Eaton Co. Ltd., contrasting its fortunes with those of fellow Canadian retail survivors Hudson's Bay Company and Canadian Tire.
Organizational learning has many virtues, virtues which recent writings in strategic management have highlighted. Learning processes, however, are subject to some important limitations. As is well-known, learning has to cope with confusing experience and the complicated problem of balancing the competing goals of developing new knowledge (i.e., exploring) and exploiting current competencies in the face of dynamic tendencies to emphasize one or the other. We examine the ways organizations approach these problems through simplification and specialization and how those approaches contribute to three forms of learning myopia, the tendency to overlook distant times, distant places, and failures, and we identify some ways in which organizations sustain exploration in the face of a tendency to overinvest in exploitation. We conclude that the imperfections of learning are not so great as to require abandoning attempts to improve the learning capabilities of organizations, but that those imperfections suggest a certain conservatism in expectations.
This empirical paper investigates the relationships between the amount of human capital that flows into a firm and two activities underlying a firm’s knowledge production, variation or change and knowledge retention. We track the flow of human capital within and across organizational and geographic space for all multi-unit banks operating in the world foreign exchange trade industry from 1973 to 1993. The findings indicate that an increased reliance on past experience reduces how much human capital a firm imports in the future. This effect is moderated by a self-reinforcing cycle of human capital inflow. Inflows of human capital also decline when a firm has recently adopted novel changes in its operations. The paper uses evolutionary thinking to define a model for intrafirm knowledge production.
This paper examines the nature of the core capabilities of a firm, focusing in particular on their interaction with new product and process development projects. Two new concepts about core capabilities are explored here. First, while core capabilities are traditionally treated as clusters of distinct technical systems, skills, and managerial systems, these dimensions of capabilities are deeply rooted in values, which constitute an often overlooked but critical fourth dimension. Second, traditional core capabilities have a down side that inhibits innovation, here called core rigidities. Managers of new product and process development projects thus face a paradox: how to take advantage of core capabilities without being hampered by their dysfunctional flip side. Such projects play an important role in emerging strategies by highlighting the need for change and leading the way. Twenty case studies of new product and process development projects in five firms provide illustrative data.
While exploration and exploitation represent two fundamentally different approaches to organizational learning, recent literature has increasingly indicated the need for firms to achieve a balance between the two. This balanced view is embedded in the concept of ambidextrous organizations. However, there is little direct evidence of the positive effect of ambidexterity on firm performance. This paper seeks to test the ambidexterity hypothesis by examining how exploration and exploitation can jointly influence firm performance in the context of firms' approach to technological innovation. Based on a sample of 206 manufacturing firms, we find evidence consistent with the ambidexterity hypothesis by showing that (1) the interaction between explorative and exploitative innovation strategies is positively related to sales growth rate, and (2) the relative imbalance between explorative and exploitative innovation strategies is negatively related to sales growth rate.
Describes cases of crises in companies to illustrate how top managers can guide organizations into crises and intensify crises, as well as halt crises by disclosing opportunities, arousing courage, and stirring up enthusiasm. Top managers' ideals dominate organizational learning, but they also prevent unlearning. Encased learning produces blindness and rigidity that may breed full-blown crises. (12 ref) (PsycINFO Database Record (c) 2012 APA, all rights reserved)
Why might firms be regarded as astutely managed at one point, yet subsequently lose their positions of industry leadership when faced with technological change? We present a model, grounded in a study of the world disk drive industry, that charts the process through which the demands of a firm's customers shape the allocation of resources in technological innovation—a model that links theories of resource dependence and resource allocation. We show that established firms led the industry in developing technologies of every sort—even radical ones—whenever the technologies addressed existing customers' needs. The same firms failed to develop simpler technologies that initially were only useful in emerging markets, because impetus coalesces behind, and resources are allocated to, programs targeting powerful customers. Projects targeted at technologies for which no customers yet exist languish for lack of impetus and resources. Because the rate of technical progress can exceed the performance demanded in a market, technologies which initially can only be used in emerging markets later can invade mainstream ones, carrying entrant firms to victory over established companies.
This paper examines the nature of the core capabilities of a firm, focusing in particular on their interaction with new product and process development projects. Two new concepts about core capabilities are explored here. First, while core capabilities are traditionally treated as clusters of distinct technical systems, skills, and managerial systems, these dimensions of capabilities are deeply rooted in values, which constitute an often overlooked but critical fourth dimension. Second, traditional core capabilities have a down side that inhibits innovation, here called core rigidities. Managers of new product and process development projects thus face a paradox: how to take advantage of core capabilities without being hampered by their dysfunctional flip side. Such projects play an important role in emerging strategies by highlighting the need for change and leading the way. Twenty case studies of new product and process development projects in five firms provide illustrative data.
Crises force organizations to replace top managers, so top managers should try to avoid crises through continuous unlearning. The authors suggest ways in which top managers can help themselves unlearn.
Why might firms be regarded as astutely managed at one point, yet subsequently lose their positions of industry leadership when faced with technological change? We present a model, grounded in a study of the world disk drive industry, that charts the process through which the demands of a firm's customers shape the allocation of resources in technological innovation - a model that links theories of resource dependence and resource allocation. We show that established firms led the industry in developing technologies of every sort-even radical ones - whenever the technologies addressed existing customers' needs. The same firms failed to develop simpler technologies that initially were only useful in emerging markets, because impetus coalesces behind, and resources are allocated to, programs targeting powerful customers. Projects targeted at technologies for which no customers yet exist languish for lack of impetus and resources. Because the rate of technical progress can exceed the performance demanded in a market, technologies which initially can only be used in emerging markets later can invade mainstream ones, carrying entrant firms to victory over established companies.
Technology strategy variables tend to predominate as predictors of survival in the fast-changing rigid disk drive industry. Building on these previous studies, we here test the hypothesis that the technological and market strategies of a new entrant are highly interrelated and that their joint effect plays an important role in a firm's probability of survival. In particular, we propose that firms that target new market segments with an architectural innovation will tend to be more successful than those that target existing markets or innovate in component technology, even after controlling for all the competing predictors of survival. This paper advances the existing literature on innovation by tracing the main technical elements of a dominant design in the rigid disk drive industry over time, and provides a much more rigorous definition of the concept of a dominant design than we have had in the past. We find the notion of first-mover advantage is not applicable in the rigid disk drive industry. Instead, we propose the idea of an entry-window tightly linked to the emergence of the dominant product design as defined.
This study examined the extent to which the percentage of outside directors on a corporation's board of directors, the concentration of equity ownership, and the roles of individual and institutional stockholders influence the company's R&D strategy. We found that high insider representation on a board and a concentration of equity among institutional investors positively affected corporate R&D spending.
This exploratory study of 57 large bankruptcies and 57 matched survivors examined the dynamics of major corporate failure. Prior research was used to guide selection of the four major constructs studied: domain initiative, environmental carrying capacity, slack, and performance. What emerges is a clear portrayal of a protracted process of decline, aptly portrayed by prior theorists, and modeled here, as a downward spiral. In the firms studied, significant features of the downward spiral included early weaknesses in slack and performance, extreme and vacillating strategic actions, and abrupt environmental decline. An elaboration of the last two stages of decline is also presented, based on the findings from this study. The down-ward-spiral model is then illustrated with a case example. The study sheds light on major debates and dilemmas in the fields of organization theory and strategy regarding why major firms fail.
Boards of directors serve two important functions for organizations: monitoring management on behalf of shareholders and providing resources. Agency theorists assert that effective monitoring is a function of a board's incentives, whereas resource dependence theorists contend that the provision of resources is a function of board capital. We combine the two perspectives and argue that board capital affects both board monitoring and the provision of resources and that board incentives moderate these relationships.
The field of corporate governance is at a crossroads. Our knowledge of what we know about the efficacy of corporate governance mechanisms is rivaled by what we do not know. This special topic forum is dedicated to continuing the rich tradition of research in this area, with the hope that the models and theories offered will propel corporate governance research to the next level, enhancing our understanding of those governance structures and mechanisms that best serve organizational functioning.
An examination of the diverse literature on organizational decline shows that there is disagreement regarding the effects of decline on innovation. Some research streams suggest that organizational decline interferes with an organization's capacity to innovate, whereas other research implies just the opposite: organizational decline stimulates innovation. In this article we integrate the inconsistent perspectives and findings in these research streams by developing a contingency model. The model identifies variables at the environmental, organizational, and individual levels of analysis that determine whether organizational decline inhibits or stimulates innovation. We summarize the moderating effects of these variables with empirically testable propositions and discuss implications of the framework for future research and management practice.
This paper reviews current perspectives on organizational decline and integrates important underlying factors into a conceptual framework that refines the definition of decline in organizations. In the model developed here, decline moves through the following stages: (1) the organization is blind to the early stages of decline; (2) it recognizes the need for change but takes no action; (3) it takes action, but the action is inappropriate; (4) it reaches a point of crisis; and (5) it is forced to dissolve. The discussion of this model points to areas in which additional research is needed to develop sensitivity to the conditions leading to decline and a better understanding of conditions that are common to declining organizations.
This exploratory study of 57 bankrupt firms and 57 matched survivors compared senior managers' letters to shareholders during demand-decline crises to see which aspects of the environment they pay attention to. Through content analysis of the letters from the five years preceding the bankruptcy of the failed firm in each pair, we measured the focus of top managers on their external (input and output) and internal environments. Results indicate that under normal circumstances managers of surviving firms pay equal attention to the internal and external environment and more attention to the output environment than to the input environment. When a crisis of demand decline occurs, they pay more attention to the critical aspects of their external environment. In contrast, managers of failing firms deny or ignore output factors during crisis and pay more attention to the input and internal environments. The results are consistent with the normative strategy literature's hypothesis that successful firms attend to critical success factors related to the output environment (e.g., customer needs and demand growth) and the decline literature's hypothesis that failing firms deny crises and avoid focusing on long-term problems because of short-run resource constraints and threat-rigidity response. These results are not predicted by previous studies of self-serving attributions in letters to shareholders.
Organizations evolve through periods of incremental or evolutionary change punctuated by discontinuous or revolutionary change. The challenge for managers is to adapt the culture and strategy of their organizations to its current environment, but to do so in a way that does not undermine its ability to adjust to radical changes in that environment. They must, in other words, create an ambidextrous organization—one capable of simultaneously pursuing both incremental and discontinuous innovation.
Although “mental models” are of central importance to system dynamics research and practice, the field has yet to develop an unambiguous and agreed upon definition of them. To begin to address this problem, existing definitions and descriptions of mental models in system dynamics and several literatures related to cognitive science were reviewed and compared. Available definitions were found to be overly brief, general, and vague, and different authors were found to markedly disagree on the basic characteristics of mental models. Based on this review, we concluded that in order to reduce the amount of confusion in the literature, the mental models concept should be “unbundled” and the term “mental models” should be used more narrowly. To initiate a dialogue through which the system dynamics community might achieve a shared understanding of mental models, we propose a new definition of “mental models of dynamic systems” accompanied by an extended annotation that explains the definitional choices made and suggests terms for other cognitive structures left undefined by narrowing the mental model concept. Suggestions for future research that could improve the field's ability to further define mental models are discussed. © 1998 John Wiley & Sons, Ltd.
This paper examines the consequences of symbolic action in corporate governance. Specifically, we examine (1) whether the stock market reacts favorably to specific governance mechanisms that convey the alignment of CEO and shareholder interests, such as the adoption of long-term incentive plans (LTIPs), even if such plans are not actually implemented, (2) whether providing agency-related explanations for LTIPs affects the stock market response, and (3) whether the symbolic adoption of LTIPs deters other governance reforms that would reduce CEOs' control over their boards. Analysis of data from over 400 corporations over a ten-year period suggests that symbolic corporate actions can engender significant positive stockholder reactions and deter other, more substantive governance reforms, thus perpetuating power imbalances in organizations. We discuss implications for institutional and agency-based perspectives on organizations.
Research on organizational decline suggests that some organizations cope with decline by becoming more rigid, while others become more flexible and risk taking. Few studies have examined the specific managerial activities that lead to the more flexible course. This study reanalyzes a case of organizational decline in a small midwestern school district that coped successfully by implementing a carefully structured participation process. Administrative leaders in the district, in particular the superintendent, “opened a conversation” through a carefully arranged and supported task force with a broad group of citizens, staff, teachers and students about the goals and priorities of the district. The citizens' committee efforts continued for six months and resulted in a strong consensus for action (a tax levy, closing a school, restatement of program priorities and staff rollbacks).
The case points to managerial actions that other organizations could follow to remain flexible and vitalized during decline. Critical steps included: shaping the perceptual fields of participants through information and disclosure in order to help participants recognize a serious and urgent problem without introducing crisis; careful management and operational support of task formats for broadened participation, with minimal influence on the substance of their recommendations; leadership through coaching of submanagers who facilitated the process indirectly; anticipating and dealing directly with conflicts by balancing views and channeling different interests into shared governance opportunities where heterogeneity was valued and institutional knowledge could be gained.
The authors advance a political model, based on management as a process of governance, to explain how the leadership in this organization conceptualized its role. Management acted as a steward for decisions about organizational goals and legitimacy that others would make. By surrendering the power to shape reality for others and instead allowing them through discourse to establish a coherent policy out of heterogeneity, the superintendent created commitment to the organization during a time of stress and eventually a robust consensus which became the basis for action. A model of shared governance that was in harmony with the community's history and values and that reflected the superintendent's personal philosophy was implemented through specific activities.
The shared governance model provides a unified conceptual explanation for why the superintendent acted as he did, and it highlights the specific functions managers might perform if the organization is to respond flexibly during decline. The political interpretation extends and refines current theoretical models of organizational decline processes and suggests approaches that are potentially applicable to other organizations.
The paper examines the contribution to strategy by chairmen and non-executive directors in large UK companies. The collective label of 'part-time board member' is used to refer to individuals performing these roles. The paper asks 'how, if at all, do part-time board members influence strategy in UK plc's'?. Using data gathered from interviews with 108 company directors, the paper suggests that part-time board members do not simply ratify decisions made by all-powerful executives. A conceptual model is developed to show that part-time board members are able to influence processes of strategic choice, change and control by shaping both the ideas that form the content of company strategy and the methodologies and processes by which those ideas evolve. Their involvement in strategy is conditioned by factors such as: changing norms about corporate governance; the history and performance of the company; the process and conduct of board meetings and informal dialogue amongst company directors between board meetings.
Jim March's framework of exploration and exploitation has drawn substantial interest from scholars studying phenomena such as organizational learning, knowledge management, innovation, organizational design, and strategic alliances. This framework has become an essential lens for interpreting various behaviors and outcomes within and across organizations. Despite its straightforwardness, this framework has generated debates concerning the definition of exploration and exploitation, and their measurement, antecedents, and consequences. We critically review the growing literature on exploration and exploitation, discuss various perspectives, raise conceptual and empirical concerns, underscore challenges for further development of this literature, and provide directions for future research.
This paper investigates interrelationships of product design, organization design, processes for learning and managing knowledge, and competitive strategy. This paper uses the principles of nearly decomposable systems to investigate the ability of standardized interfaces between components in a product design to embed coordination of product development processes. Embedded coordination creates 'hierarchical coordination' without the need to continually exercise authority - enabling effective coordination of processes without the tight coupling of organizational structures. We develop concepts of modularity in product and organization designs based on standardized component and organization interfaces. Modular product architectures create information structures that provide the 'glue' that holds together the loosely coupled parts of a modular organization design. By facilitating loose coupling, modularity can also reduce the cost and difficulty of adaptive coordination, thereby increasing the strategic flexibility of firms to respond to environmental change. Modularity in product and organization designs therefore enables a new strategic approach to the management of knowledge based on an intentional, carefully managed loose coupling of a firm's learning processes at architectural and component levels of product creation processes.
Why might firms be regarded as astutely managed at one point, yet subsequently lose their positions of industry leadership when faced with technological change? We present a model, grounded in a study of the world disk drive industry, that charts the process through which the demands of a firm's customers shape the allocation of resources in technological innovation—a model that links theories of resource dependence and resource allocation. We show that established firms led the industry in developing technologies of every sort—even radical ones—whenever the technologies addressed existing customers' needs. The same firms failed to develop simpler technologies that initially were only useful in emerging markets, because impetus coalesces behind, and resources are allocated to, programs targeting powerful customers. Projects targeted at technologies for which no customers yet exist languish for lack of impetus and resources. Because the rate of technical progress can exceed the performance demanded in a market, technologies which initially can only be used in emerging markets later can invade mainstream ones, carrying entrant firms to victory over established companies.
There is empirical evidence that established firms often have difficulty adapting to radical technological change. Although prior work in the evolutionary tradition emphasizes the inertial forces associated with the local nature of learning processes, little theoretical attention has been devoted in this tradition to understanding how managerial cognition affects the adaptive intelligence of organizations. Through an in-depth case study of the response of the Polaroid Corporation to the ongoing shift from analog to digital imaging, we expand upon this work by examining the relationship between managers' understanding of the world and the accumu- lation of organizational capabilities. The Polaroid story clearly illustrates the importance of managerial cognitive representations in directing search processes in a new learning environ- ment, the evolutionary trajectory of organizational capabilities, and ultimately processes of organizational adaptation. Copyright © 2000 John Wiley & Sons, Ltd.
The dynamic capabilities framework analyzes the sources and methods of wealth creation and capture by private enterprise firms operating in environments of rapid technological change. The competitive advantage of firms is s