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Influence Costs, Structural Inertia, and Organizational Change

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  • Scott Schaefer

Abstract

This paper builds an economic model of the relationship between influence activity and resistance to change in organizations. I show that influence activity can create harmful barriers to change and that the influence costs of change are positively related to the firm's prospects. The model rationalizes the widely held view that firms often must endure a survival‐threatening crisis before meaningful change can be achieved. I show that employees' choices of whether to engage in influence activity can depend on their beliefs as to whether the firm will choose to change its organizational form. If employees expect change, their best response is to try to affect the form of the change in their favor.

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  • Scott Schaefer, 1998. "Influence Costs, Structural Inertia, and Organizational Change," Journal of Economics & Management Strategy, Wiley Blackwell, vol. 7(2), pages 237-263, June.
  • Handle: RePEc:bla:jemstr:v:7:y:1998:i:2:p:237-263
    DOI: 10.1111/j.1430-9134.1998.00237.x
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    References listed on IDEAS

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    Cited by:

    1. Blind, Georg D. & Lottanti von Mandach, Stefania, 2021. "Private Equity Buyouts in Japan: Effects on Employment Numbers," Journal of the Japanese and International Economies, Elsevier, vol. 59(C).
    2. Repenning, Nelson P. (Nelson Peter), 1998. "Drive out fear (unless you can drive it in) : the role of agency and job security in process improvement," Working papers WP 4041-98., Massachusetts Institute of Technology (MIT), Sloan School of Management.
    3. DeVaro, Jed, 2011. "Using "opposing responses" and relative performance to distinguish empirically among alternative models of promotions," MPRA Paper 35175, University Library of Munich, Germany.
    4. Delmastro, Marco, 2002. "The determinants of the management hierarchy: evidence from Italian plants," International Journal of Industrial Organization, Elsevier, vol. 20(1), pages 119-137, January.
    5. Luis Garicano & Luis Rayo, 2016. "Why Organizations Fail: Models and Cases," Journal of Economic Literature, American Economic Association, vol. 54(1), pages 137-192, March.
    6. Dan Bernhardt & Steeve Mongrain, 2010. "The Layoff Rat Race," Scandinavian Journal of Economics, Wiley Blackwell, vol. 112(1), pages 185-210, March.
    7. Jin Li & Niko Matouschek & Michael Powell, 2017. "Power Dynamics in Organizations," American Economic Journal: Microeconomics, American Economic Association, vol. 9(1), pages 217-241, February.
    8. Hendrikse, G.W.J., 2000. "Organizational Change and Vested Interests," ERIM Report Series Research in Management ERS-2000-17-ORG, Erasmus Research Institute of Management (ERIM), ERIM is the joint research institute of the Rotterdam School of Management, Erasmus University and the Erasmus School of Economics (ESE) at Erasmus University Rotterdam.
    9. Phillip Leslie & Paul Oyer, 2008. "Managerial Incentives and Value Creation: Evidence from Private Equity," NBER Working Papers 14331, National Bureau of Economic Research, Inc.
    10. Jung Hur & Yohanes E. Riyanto, 2012. "Organizational Structure and Product Market Competition," Journal of Economics & Management Strategy, Wiley Blackwell, vol. 21(3), pages 707-743, September.
    11. Meeus, Marius T. H. & Oerlemans, Leon A. G., 2000. "Firm behaviour and innovative performance: An empirical exploration of the selection-adaptation debate," Research Policy, Elsevier, vol. 29(1), pages 41-58, January.
    12. Naz Abdulkareem Arif & Moha Asri Bin Abdullah, 2020. "Problems and Global Challenges of Small and Medium Enterprises (SMEs) in Iran," International Journal of Science and Business, IJSAB International, vol. 4(12), pages 80-92.
    13. Kräkel, Matthias, 2006. "Firm Size, Economic Situation and Influence Activities," IZA Discussion Papers 2391, Institute of Labor Economics (IZA).
    14. Fosfuri, Andrea & Rønde, Thomas, 2009. "Leveraging resistance to change and the skunk works model of innovation," Journal of Economic Behavior & Organization, Elsevier, vol. 72(1), pages 274-289, October.
    15. Massimo G. Colombo & Marco Delmastro, 2002. "The Determinants of Organizational Change and Structural Inertia: Technological and Organizational Factors," Journal of Economics & Management Strategy, Wiley Blackwell, vol. 11(4), pages 595-635, December.
    16. Nelson P. Repenning, 2000. "Drive out Fear (Unless You Can Drive It in): The Role of Agency and Job Security in Process Improvement," Management Science, INFORMS, vol. 46(11), pages 1385-1396, November.
    17. Andrea Fosfuri & Thomas Rønde, 2009. "Leveraging Resistance to Change and the Skunk Works Model of Innovation," Post-Print hal-00699208, HAL.
    18. Michael Powell, 2015. "An Influence-Cost Model of Organizational Practices and Firm Boundaries," Journal of Law, Economics, and Organization, Oxford University Press, vol. 31(suppl_1), pages 104-142.

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