The Rise and Fall of Yukos: A Case Study of Success and Failure in an Unstable Institutional Environment

Abstract

This article uses case research to explore the success and subsequent failure of the Russian oil company Yukos, using the dual lenses of the resource-based view and institutional theory. Yukos' failure resulted from a combination of factors linked to the internal capabilities of the organization, its external environment and the leadership of its Chief Executive Officer. The organization failed to develop the dynamic capabilities to sense and shape opportunities and threats in the changing institutional environment. It lacked political competences and failed to pursue non-market strategies. Ultimately, it failed to co-evolve with its institutional environment, resulting in poor organizational and environmental fit, and lack of legitimacy, due to the non-congruence of its organizational values with its organizational context. Yukos' transformation into the leading Russian oil company in terms of financial and market indicators blinded it to the fact that such criteria were no longer key for survival in a changing institutional environment. Hence, the implication for managers is that to focus purely on what currently represents financial and operational success may be an unwise strategy.