The Red Queen, success bias, and organizational inertia
Article Type: Abstracts From: Strategic Direction, Volume 25, Issue 10
Barnett W.P. and , Pontikes E.G.Management Science (USA), July 2008, Vol. 54 No. 7, Start page: 1237, No. of pages: 15
Purpose – Considers the phenomenon of successful organizations moving into new markets, only for them to fail. Design/methodology/approach –Argues that an organization’s ability to change is shaped through the Red Queen competition effect, whereby competition causes organizations to learn and thereby become stronger competitors in their own markets, and less tuned into other markets where different capabilities are required. Draws a distinction between exploration and exploitation, and elaborates on the relationship between the Red Queen and exploitation, on the disruptive consequences of the Red Queen,and on the Red Queen and success bias. Develops associated hypotheses which are tested using data on the life histories of every manufacturer of an electronic digital, general-purpose computer system in the USA between 1951 and 1994. Findings – Illustrates that competitive experience in one market increases failure rates when organizations move into another market; that surviving competition in one market increases rates of organizational expansion in other markets; and historical competition in the midrange market lowered the failure rate of midrange firms in that market, consistent with the prediction of the Red Queen theory. Research limitations/implications – Suggests the value in re-estimating modes from existing literature to assess whether their results are being driven by current-time or historical competition. Practical implications– Points to the need for managers to consider how the scope of their organization’s experience constrains their ability to successfully manoeuvre into new markets. Originality/value – Demonstrates how Red Queen competition plays a key role in shaping both the likelihood and consequences of organizational change.Article Type: Research paperISSN: 0025-1909Reference: 38AK155
Keywords: Competitive strategy, Inertia, Learning, Learning organizations, Organizational performance
