Abstract
The volume edited by Sydow and Schreyögg, Self-Reinforcing Processes in and among Organizations, provides an articulate and thoughtful account of inter- and intra-organizational dynamics sustained by self-reinforcing loops.
The analysis of self-reinforcing processes in the organizational field has a long tradition and deep epistemological roots. On the one hand, we can refer to the stream of research on system dynamics, initiated in the 1960s at MIT, that developed a number of models to describe and analyse organizational processes as feedback loops (Forrester, 1968; Sastry, 1998; Sterman, 2000). On the other hand, there is a parallel effort to represent organizations as patterns of interactions and multiple causal loops (Weick, 1979; Masuch, 1985; Garud & Kumaraswamy, 2005). In particular, Weick (1979, chapter 3) grounds his theory of organizing on the idea of self-reinforcing mechanisms.
This book is intellectually rooted in and influenced by the path-dependent theory of organizations, conceptualized by the School of the Freie Universität Berlin (Schreyögg & Sydow, 2011; Sydow, Schreyögg & Koch, 2009). The notion of path dependence is at the center of the discussion in at least four studies (Chapters 2, 3, 4 and 7) and it is fundamental in another three conceptual contributions (Chapters 10, 11 and 12). The chapters that are based on empirical studies provide very important instances of how the analysis of self-reinforcing processes can be used to rethink organizational phenomena. These chapters demonstrate how to collect data, how to define the variables and to identify the emergence and the effect of self-reinforcing dynamics. In their introductory chapter Sydow and Schreyögg do not provide explicit and extensive methodological guidelines to follow in order to develop further research on self-reinforcing processes; on the other hand, all the contributions that deal with empirical data can serve as templates for further studies.
Sydow and Schreyögg position the contribution of this book within the tradition of theories and studies of self-reinforcing dynamics in economics, organizational sociology and strategy. Increasing returns, technological adoption, learning, self-fulfilling prophecies, herding, bandwagon, network effect, sunk costs and commitment spirals are some of the most studied phenomena that are dominated by interdependent circularity and by deviation-amplifying feedback loops. By reviewing a heterogeneous literature, the authors identify and extrapolate six major sources of self-reinforcing mechanisms.
First, economies of scale: increasing the size of an operating unit (e.g. a machine or a plant) for the production of goods or services derives a decreasing cost per unit, and, if prices remain unchanged, increase profitability. Second, network externalities: increasing returns to adopting a product or a service significantly depend on the decisions of the other adopters. While this network effect is usually studied at the level of economic systems (e.g. technological diffusion), it also affects decisions at the organizational level (e.g. standardization of information tools). Third, learning effect: the more an operation is performed, the more efficiently (faster and with fewer errors, and therefore more reliably) it will be executed in the future, ultimately decreasing the cost per unit of output, and reducing the attractiveness of other comparable alternatives.
Fourth, adaptive expectations: individuals’ behaviour is affected by beliefs and expectations of future events, to the point that initial suppositions (regardless of their content of truth) are made real. This is the case, for instance, for self-fulfilling prophecies. Fifth, coordination effect: the more organizations introduce and rely on specific coordination tools (e.g. rules, routines), the more efficient is the interaction among the interdependent organizational units, due to increased predictability and reliability of organizational behaviour. This higher level of efficiency makes this coordination tool more attractive for other people, so it will be continuously and increasingly used. Sixth, complementarity effect: the value of a product or a service depends on the availability and the level of development of a different product or service that is complementary to it. A development in one of the complementary products improves the system performance only to the point where the other complementary products do not represent a bottleneck. Further, system performance can improve by a development that removes a bottleneck that then creates another one in some other component. This type of self-reinforcing mechanism is particularly relevant in the case of innovation in the car industry (see Chapter 2).
Besides the strong emphasis on self-reinforcing dynamics, one trademark of the theoretical framework outlined in this book is the constant focus on the evolution of organizations. The aim of the analysis is not simply to observe the reproduction of existing mechanisms and structures in the long run, but rather to explain how these dynamics endogenously transform organizational settings. In other words, the evolutionary path shaped by cumulated and iterated self-reinforcing process is part of the explicandum. In the case of path dependence, for instance, the effect of self-reinforcing mechanisms explains the reducing number of options that characterizes the organizational evolution and the rise of a lock-in state.
All the empirical studies that appear in this book directly tackle self-reinforcing processes and path dependence. Great effort was made to avoid any general metaphorical reference to self-reinforcing dynamics in favour of an accurate characterization of the empirical study, the initial conditions, the variables, their interdependences and the sources of amplifying causal loops. In addition, none of the contributions is a simple illustration of self-reinforcing mechanisms. The empirical studies are thoughtful analyses that either deepen the understanding of the general theoretical model by focusing on critical elements that are enlightened by the case at hand, or they establish relevant connections with other theoretical frameworks. By doing so, they enhance the theoretical applications and implications of the general model. This clearly is one of the strengths and contributions of this volume.
A great example of contributions that enrich the theory of self-reinforcing feedback loops is the study by Meyer (Chapter 2), which discusses the proper use of the concept of mechanism in the social sciences and offers examples of its proper use. In addition, the contribution of this chapter to the theoretical foundations and research agenda outlined in this book is to question if and how social mechanisms can be described as either instances of self-reinforcing processes or their outcomes.
The comparative studies performed by Liu, Cao and Xing (Chapter 4) and by van Driel (Chapter 12) also analyse self-reinforcing dynamics empirically. The first study analyses the development of two Chinese cities, Suzhou and Wuxi, in relation to the regional programmes introduced to support entrepreneurship. The second study is based on historical accounts of innovations adopted in the ports of Amsterdam, Rotterdam and Antwerp. In both cases, these studies offer an occasion to speculate on and theorize what is and what generates a path. They both advocate a definition of path as a sequence of events. The level of detail they provide makes it possible to recognize the specific combination of events that are subject to self-reinforcement, as well as the situations that lock in and lock out the organizational processes.
Another chapter using self-reinforcing processes as a tool to reshape and enhance our theoretical understanding of some phenomenon is the study carried out by Faßauer (Chapter 8) on anomie as a source of organizational deviance. Rather than a temporary and pathological status, anomie is framed as a permanent tension between the normative structure of an organization and individuals’ behaviour and adaptation to it. At the organizational level, a tension is created when the organizational goals are not consistent with the means assigned to reach those goals. At the individual level, tension arises in deciding whether to accept or reject the prescribed goals and norms. The self-reinforcing mechanism that is relevant in this case is the one based on adaptive expectations: organizational members consider assuming deviant behaviours under the supposition that others will do the same. Any innovative behaviour, Faßauer argues, implies a deviation from some existing norm (p. 151) and exposes individuals to anomic conditions. The results of deviations are strongly affected by the positive feedback mechanisms that characterize the adaptive response of organizational members to the anomic situation. This analysis on anomie-driven dynamics of deviance offers important insights to the general theory of organizational path dependence, as it introduces additional arguments to the discussion on the sources of ‘unlocking situations’, i.e. situations that overturn the lock-in effect of path dependence.
An explicit effort to use self-reinforcing dynamics as a means to connect together different theoretical approaches is the comparative analysis developed by Berthod and Sydow (Chapter 11) on the evolutionary dynamics stipulated in neo-institutional theory and path dependence theory. The authors discuss in an articulate way the commonalities as well as the differences between the two perspectives. The five major common traits (p. 210) are: (a) the relevance of shared and socially constructed practices; (b) the influence of history and time; (c) the role played by social mechanism; (d) some persistency and rigidity in the processes; and (e) the possibility of ending up with inefficient solutions. On these bases, the authors identify a common research space where path dependence and neo-institutional theories can be consistently combined, and call this intersection the ‘institutional path’. The analyses of institutional paths look at the processes of institutionalization of practices, consider the small events that create the initial conditions, and take into consideration the explanatory power of self-reinforcing mechanisms.
This edited volume by Sydow and Schreyögg outlines a theory of self-reinforcing processes. On the one hand, the unexpressed ambition is to provide an evolutionary theory that at the same time is general and accurate; multiple causal loops, in fact, allow the integration of both systemic and individual levels in a very precise manner. On the other hand, this framework is still strongly rooted in the path dependence theory developed by the Berlin School; organizational path dependence represents a highly consistent archetype, but a theory of self-reinforcing processes has broader possibilities. One suggestion for further theoretical development is to look more at situations where organizations unlock their path. In this respect, the exit phase is a very well-identified situation in the strategic management and organization literature (Baden-Fuller, 1989; Ross & Staw, 1993). An interesting challenge is to reconceptualize it as the result of contrasting self-reinforcing processes, where the exit is associated with the dominance of some mechanisms over others. The studies presented in Chapters 5 and 12 already move in this direction, to some extent.
Finally, the book provides a powerful working framework to discuss and analyse complex systems with specific and precise reference to empirical cases, and not simply as a metaphor. First, self-reinforcing processes work as deviation-amplifying feedback that may keep organizations trapped in their steady state, but may also lead organizations to adapt and evolve towards unknown directions. Second, the theory of self-reinforcing processes outlined in this book refers to organizational and inter-organizational interactions. This is an additional source of complexity that can be modelled by this theory. Axelrod and Cohen (1999) identified three levels of adaptation of complex systems: variation, interaction and selection. Organizational interactions are strongly evident in the study on the adaptation (or lack thereof) of service innovation capabilities by Gryszkiewicz, Giannopoulou and Barlatier (Chapter 7), as well as in the study on the development of innovation programmes in Wuxi and Suzhou (Chapter 4), but they are not exceptions. All the empirical studies in this book deal with feedback loops that involve interactions among agents and systems. This is not surprising, since at least four types of self-reinforcing processes (i.e. network externalities, adaptive expectations, coordination effect and complementarity effect) directly or indirectly assume agency and system interdependence. Therefore, the theory of self-reinforcing processes in and among organizations can definitely serve as an additional general framework to study organizations as complex adaptive systems.