Strategic Drift: Institutional pluralism, specialization and organizational growth

Abstract

We develop a theory of organizational growth under conditions of institutional pluralism based on analysis of the 27-year growth trajectory of ALPI, an Italian workforce integration organization. In contrast to the suggestion of prior research that organizations respond to institutional pluralism by blending or balancing between logics, ALPI grew via multiple phases of institutional specialization, each characterized by the temporary specialization of ALPI’s internal structures to align with a different institutional domain and its corresponding logic. To theorize about this unexpected pattern, we build on Penrose’s (1959) Theory of the Growth of the Firm to analyze why and how ALPI transitioned between these multiple phases of growth. We find that transitions were supported by the continuous development of a stock of versatile resources across phases: when the organization achieved its growth limit within one institutional domain, it used resources to pursue growth opportunities in an alternative domain. We further find that such transitions required the reconceptualization of resources and realignment of internal structures to the alternative domain. Based on our findings, we conceptualize a model of “strategic drift” that characterizes this trajectory of imbalanced growth.