Missing the Forest for the Trees: Modular Search and Systemic Inertia as a Response to Environmental Change

Abstract

I develop and test a theory that explains why organizations may struggle to adapt in the face of change even when their members are aware of change, are motivated to adapt, and have the resources to do so. I build on complex-systems theory, which posits that organizations face a hierarchy of interdependent problems: they must choose how to fulfill different specialized tasks and choose processes to integrate the outputs of these tasks. Because these choices are interdependent, environmental change that directly affects only a few tasks in isolation can indirectly affect the viability of major organizational processes. Recognizing these ripple effects is difficult, however: understanding complex interdependencies is challenging for decision makers, and the division of labor within organizations can create an illusion of separability between tasks. As a result, organizations may respond to such change by engaging in “modular search” for new ways to fulfill specialized tasks, but they may fail to engage in “systemic search” for new processes integrating the outputs of specialized tasks unless they can rely on information-processing structures that help decision makers better understand interdependencies among choices. I test my theory by applying sequence analysis methods to micro-level behavioral data on competitive video gaming (esports) teams. Qualitative fieldwork and an online experiment provide additional evidence of my proposed mechanisms.