Does Organizational Decline Inhibit Or Stimulate Innovation?

2575 words, 11 pages

Intro Sample...


Today, in a radically changing environment, organizational decline is inevitable for those organizations that are unable to take proactive and innovative actions. Decline is a process of negative change over time; these uncontrollable changes in the environment push firms to re-think and re-invent strategies. However, not all organizations respond innovatively. One of the questions that have been examined in literature regarding organizational decline is whether decline inhibits or simulates innovation. As in the case of organizational response to decline, the literature offers support for either argument. Some research streams suggest that decline interferes with an organization’s ability to innovate (Staw, Sandeland & Dutton, 1981).... View More »

Body Sample...


Psychological literature agrees that primary psychological effects of crisis are to “create feelings of stress and anxiety” and it results in behavioral responses of “withdrawl, reductions in critical information processing, and constriction in behavioral responses” (Menninger, 1954). In threat situations, restrictions in information processing can be explained in the following 2 ways:
• Psychological stress interferes with an individual’s ability to perceive unfamiliar stimuli. Under stress, individuals identify stimuli according to previously held “internal hypotheses”, whereas, persons in a stress-free environment are able to identify unfamiliar stimuli (Smock, 1955).
• In the area of problem solving and learning, Cowen (1952) notes that persons subject to stress conditions have been found to be less flexible and less creative in their choice of solution methods.

Constriction in Control
Along the lines of Staw et al. (1981), Burns and Stalker (1961) suggest that in threat situations, organizations experience increased centralization of authority, more extensive formalization, and standardization of procedures. Kanter (1977) proposes that “as the importance of decisions increases, they are made at progressively higher levels within an organization hierarchy, presumably because top level decision making is less likely to differ from the core values or goals of the organization.” Contrary to the views of Kanter (1977), Hermann (1963) argued that increased centralization is a result of a contraction in authority, reduction in the number of participants and decision ...

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