A Process Theory of Organizational Adaptation: a Top Management Game Perspective

Abstract

Strategy has overlooked how organizations adapt to their environments. To overcome this gap, this article builds on the punctuated equilibrium model and offers a theory that shows that organizations adapt through a top management game. Our theory models a process through which an organization changes/does not change its path following a signal of drift between the organization and its environment. During what we call the adaptation crisis process, coalitions within the top management group play a game to solve the strategic dilemma between keeping the current path (e.g., path reinforcement) or changing it (e.g., path transformation). They strategize and confront their own responses to the signal of drift based on their deciphering and strategic interests, the dominant coalition being more likely to follow the same path and dissident coalitions being more likely to change it. The solution to the dilemma, path reinforcement or transformation, depends on the winner of the game. However, if the drift is not bridged, the adaptation crisis continues, and new rounds of top management games occur until the death of the organization or its ability to reconnect with its environment. This process theory of organizational adaptation offers implications for both strategic management research and practice.