A hotly debated question of organizational theory—especially evolutionary theories of organization—asks how inert are organizational structures. Answering the question requires analysis of not only organizational change but also of the consequences of change for organizational survival. This study examines one such organizational change—technical innovation—and its effects on the failure rates of American automobile producers from 1885 to 1981. Technical innovations are shown to generate primarily beneficial effects for the firms spawning them and primarily detrimental effects for competitor firms. However, analysis of certain organizational contexts—large organizations in particular—suggests that the risks of innovation may on occasion outweigh benefits. The findings imply that some theories of strategic management need rethinking.
Reprinted in Firms, Markets and Hierarchies, Teece (eds.), pages 499-524. Oxford University Press, New York, 1999.