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Process management, technological innovation, and organizational adaptation

Mary Jo Benner, 2002
Faculty Advisor: Michael Tushman
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A common theme in organizational research is that organizations need to exploit current capabilities while simultaneously developing new ones (March, 1991). Researchers have highlighted the importance of both types of activities for adaptation in changing environments. While exploitative activities help firms quickly learn and adapt in the short term, those same activities may ultimately inhibit organizational responsiveness to major environmental changes (March, 1991; Levinthal, 1991). This need for dynamic capabilities has coincided with institutional pressures and a wave of managerial activity focused on process management and control (Cole, 1998). Process management has emerged as a widely adopted managerial innovation, and underlies many quality programs, including Total Quality Management, ISO 9000, and Six Sigma. It entails activities focused on mapping, improving and adhering to systems of organizational processes. While process management practices are expected to result in performance improvements, findings have been equivocal, and researchers have not explored the effects of such practices on technological innovation or adaptation.

This dissertation explores how process management practices affect the balance between exploitative and exploratory technological innovation and also organizational adaptation under different environmental conditions. I draw on organizational learning, adaptation and structural inertia theories to argue that while process management practices may streamline organizational activities and improve efficiency, their stabilizing effect on organizational routines may also tip the balance toward exploitative at the expense of exploratory innovation, and exacerbate resistance to change.

I test the hypotheses with a longitudinal study of process management and patenting activity in two industries. Findings indicate that increases in process management trigger shifts toward more exploitative innovations and away from exploratory innovations. Results also suggest that process management is beneficial in a stable environment, but has no financial performance benefits in a turbulent environment. I explore mechanisms underlying the relationship between these practices and technological innovation with a qualitative study involving two firms. This research contributes to organizational knowledge both theoretically, in illuminating how these ubiquitous management practices affect organizational outcomes, and empirically, by going beyond age or size proxies to assess the effects of increasing routinization on organizational outcomes like innovation and adaptation.

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