Organizational Decline and Innovation: A Contingency Framework

Abstract

An examination of the diverse literature on organizational decline shows that there is disagreement regarding the effects of decline on innovation. Some research streams suggest that organizational decline interferes with an organization's capacity to innovate, whereas other research implies just the opposite: organizational decline stimulates innovation. In this article we integrate the inconsistent perspectives and findings in these research streams by developing a contingency model. The model identifies variables at the environmental, organizational, and individual levels of analysis that determine whether organizational decline inhibits or stimulates innovation. We summarize the moderating effects of these variables with empirically testable propositions and discuss implications of the framework for future research and management practice.