Structural Inertia and Organizational Change

Theory and research on organization-environment relations from a population ecology perspective have been based on the assumption that inertial pressures on structure are strong. This paper attempts to clarify the meaning of structural inertia and to derive propositions about structural inertia from an explicit evolutionary model. The proposed theory treats high levels of structural inertia as a consequence of a selection process rather than as a precondition for selection. It also considers how the strength of inertial forces varies with age, size, and complexity. Most prominent organization theories ex- plain variability in organizational charac- teristics, that is, diversity, through reference to the history of adaptations by individual organi- zations, Earlier (Hannan and Freeman, 1977), we challenged this view and argued that adap- tation of organizational structures to envi- ronments occurs principally at the population level, with forms of organization replacing each other as conditions change. This initial statement of population ecology theory rested on a number of simplifying assumptions. A major one was the premise that individual or- ganizations are subject to strong inertial forces, that is, that they seldom succeeded in making radical changes in strategy and structure in the face of environmental threats. How strong are inertial forces on organi- zational structure? This question is substan- tively interesting in its own right. It is also strategically important, because the claim that adaptation theories of organizational change should be supplemented by population ecology theories depends partly on these inertial forces being strong. Many popularized discussions of evolution suggest that selection processes invariably favor adaptable forms of life. In fact the theory of evolution makes no such claim, as we made clear earlier (Hannan and Freeman, 1977; Freeman and Hannan, 1983). This paper goes beyond our earlier theory in acknowledging that organizational changes of some kinds occur frequently and that organizations some- times even manage to make radical changes in strategies and structures. Nevertheless, we argue that selection processes tend to favor organizations whose structures are difficult to change. That is, we claim that high levels of structural inertia in organizational populations can be explained as an outcome of an ecological-evolutionary process. In addition to deriving structural inertia as a consequence of a selection process, this paper explores some of the details of inertial forces on organizational structure. It considers how inertial forces vary over the life cycle, with organizational size, and with complexity, and suggests some specific models for these de- pendencies.