Continuous change or punctuated equilibrium: An empirical investigation of organizational operation and change in the dot-com community

Industries evolve and change through time on a series of S-Curves (Figure 1) (Anderson & Tushman, 1991).*; During the early stages of an industry the environment is highly dynamic with many new entrants, high rates of technological innovation and many different forms of organization (Aldrich, 1999). Eventually, a technological innovation or an environmental shock occurs, however, that leads to the onset of a highly turbulent period when a new S-Curve is established. Companies must then make the transition to this new curve or face extinction (Anderson & Tushman, 1991). Managers in companies going through such industry cycles must understand how to operate in order to effectively and efficiently execute their mission in their selected industry, and how to change their companies as their missions and industries evolve and change through time.; There are two grand theories that describe how organizations operate and change: one for static and one for dynamic environments. What is needed is a paradigm of organizational operation and change that addresses these issues.; The primary objectives of this proposed research project, therefore, were to (1) develop a theoretical framework, through the integration of two extant theoretical perspectives, which describes how organizations operate and change as their environments evolve and change, (2) use this new framework to explain differences in the empirical data, and to place extant theory in a larger, more coherent context and (3) conduct a preliminary test of this new framework to determine its ability to predict organizational behavior under conditions of normal industry evolution and radical industry change.; The results show strong support for the framework as a way of thinking about how organizations operate and change through time as their environment evolves and changes. That is, companies have a genetic code consisting of their strategy, structure, processes, culture, power distribution, and control mechanisms that must be matched to the environment in which the company operates. They also behave like systems subject to the laws of evolution and dynamic systems theory, which means they: (1) Contain fixed and flexible organization structures; (2) Implement strategy and process changes and let new organization structures emerge to support their execution; (3) Change incrementally and radically, either by choice in order to grow efficiently and effectively, or in reaction to normal industry evolution and competence destroying industry change; (4) Dynamically allocate managerial capabilities and power to critical processes, and ensure those processes are well defined, deployed, and executed; (5) Have political and cultural processes and problems that moderate how they operate and change. (Abstract shortened by UMI.); *Please refer to dissertation for diagram.