This Article Full Text (PDF) References Alert me when this article is cited Alert me if a correction is posted Services Email this article to a friend Similar articles in this journal Alert me to new issues of the journal Download to citation manager Citing Articles Citing Articles via HighWire Citing Articles via Google Scholar Google Scholar Articles by Haveman, H. A. Articles by Meyer, A. D. Search for Related Content

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

Columbia University, Graduate School of Business, 706 Uris Hall, 3022 Broadway, New York, New York 10027-6902
University of Oregon, Lundquist College of Business, Eugene, Oregon 97403-1208
University of Oregon, Lundquist College of Business, Eugene, Oregon 97403-1208
hah15{at}columbia.edu
mrusso{at}lcbmail.uoregon.edu
ameyer{at}lcbmail.uoregon.edu

A central debate in organizational theory concerns how organizations evolve. There are two diametrically opposing viewpoints. Adaptation theories predict that change occurs as fluid organizations adjust to meet shifting environmental demands, while selection theories predict that change occurs through the differential selection and replacement of inert organizations as environmental demands vary over time. Our paper bridges these polar opposites by using a punctuated equilibrium framework to examine organizations' responses to discontinuous industry-level change. This framework recognizes that the histories of many industries are occasionally punctuated by dramatic exogenous shocks, such as radical technological innovation, social and political turmoil, major changes in government regulation, and economic crashes. Our central thesis is that such environmental punctuations dramatically reduce pressures and rewards for organizational inertia and thereby alter both organizations' propensities for change and their survival chances following change.

We focus on one form of punctuation, major regulatory change, and study firms in two industries: general hospitals and savings and loan associations. For organizations in both industries, we examine three important outcomes: shifts in organizational domain, CEO succession, and changes in financial performance. Our analyses show that punctuational regulatory change prompts shifts in organizational domains and executive leadership. Additionally, post-punctuation domain change and post-punctuation CEO succession both affect subsequent performance. We discuss our results in light of current thinking about the content and process effects of core organizational change, which has been developed in the context of stable environments. Finally, we argue for the development of more temporally sensitive theories of organizational action.

Key Words: Organizational Evolution; Punctuated Equilibrium; Deregulation; Organizational Change; Organizational Inertia; Organizational Performance; CEO Succession

This article has been cited by other articles:

				T. L. Madsen and G. Walker Incumbent and Entrant Rivalry in a Deregulated Industry Organization Science, July 1, 2007; 18(4): 667 - 687. [Abstract] [PDF]

				G. Gavetti and J. W. Rivkin On the Origin of Strategy: Action and Cognition over Time Organization Science, May 1, 2007; 18(3): 420 - 439. [Abstract] [PDF]

				J. P. Walsh, A. D. Meyer, and C. B. Schoonhoven A Future for Organization Theory: Living in and Living with Changing Organizations Organization Science, September 1, 2006; 17(5): 657 - 671. [Abstract] [PDF]

				H. Lansisalmi, M. Kivimaki, P. Aalto, and R. Ruoranen Innovation in Healthcare: A Systematic Review of Recent Research Nurs Sci Q, January 1, 2006; 19(1): 66 - 72. [Abstract] [PDF]

				A. D. Meyer, V. Gaba, and K. A. Colwell Organizing Far from Equilibrium: Nonlinear Change in Organizational Fields Organization Science, September 1, 2005; 16(5): 456 - 473. [Abstract] [PDF]

				W. J. Henisz and A. Delios Information or influence? The benefits of experience for managing political uncertainty Strategic Organization, November 1, 2004; 2(4): 389 - 421. [Abstract] [PDF]

				T. H. Chiles, A. D. Meyer, and T. J. Hench Organizational Emergence: The Origin and Transformation of Branson, Missouri's Musical Theaters Organization Science, September 1, 2004; 15(5): 499 - 519. [Abstract] [PDF]

				H. Mitsuhashi and H. R. Greve Powerful and Free: Intraorganizational Power and the Dynamics of Corporate Strategy Strategic Organization, May 1, 2004; 2(2): 107 - 132. [Abstract] [PDF]

				A. Y. Lewin and M. P. Koza Editorial Organization Studies, November 1, 2001; 22(6): v - xii. [PDF]