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

University of Chicago, Graduate School of Business, 1101 E. 58th Street, Chicago, Illinois 60637
Hong Kong University of Science and Technology, Clear Water Bay, Kowloon, Hong Kong
Stanford University, 518 Memorial Way, Stanford, California 94305
stanislav.dobrev{at}gsb.uchicago.edu
mnkim{at}ust.hk
carroll_glenn{at}gsb.stanford.edu

We examine how experiential learning affects organizational change and its consequences on firm mortality. We develop hypotheses about the interactions of experiences with a specific type of organizational change on the one hand, and environmental stability, organizational size, and organizational niche width on the other hand. Our findings draw from analysis of the U.S. automobile industry between 1885 and 1981 and support the general prediction that "process" effects of change in the organizational core elevate the hazard of failure. We also find that a dynamic interpretation of organizational environments as comprised of other organizations helps to explicate the interplay between organization and environmental forces that shape the occurrence and outcome of transformation.

Key Words: Inertia; Organizational Change; Niche; Automobile Industry

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