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Industrial and Corporate Change, Volume 12, Number 5, pp. 1077-1098
© 2003 Oxford University Press

Impermanent institutionalization: the duration dependence of organizational rule changes

Martin Schulz

Sauder School of Business, University of British Columbia, 2053 Main Mall, Vancouver, BC V6T 1Z2, Canada. Email: Martin.Schulz{at}sauder.ubc.ca.

Abstract

Organizational rules face competing pressures that can make them more or less permanent. On the one hand, pressures for reliability, legitimacy and efficiency demand unchanging rules that provide lasting guidelines for organizational action. On the other hand, changes in the environment and the imperatives of organizational growth demand timely adaptation of organizational rules. How do organizations respond to such pressures, and what are the resulting patterns of rule change? Prior explorations of this question have emphasized either (i) institutional predictions: the likelihood of rule changes should decrease with duration (waiting time between changes); or (ii) obsolescence mechanisms: the likelihood of change should increase with duration. Surprisingly, recent studies on rule change find that in some contexts the likelihood of radical rule changes (‘suspensions’) increases with duration, while the likelihood of incremental rule changes (‘revisions’) decreases. In order to explain this surprising finding, I develop simulation model that allows me to explore how rule changes are affected by organizational tolerance for obsolescence. The findings suggest that the model offers a valid explanation for the observed patterns of rule change. A main implication of this paper is that organizational rules can become impermanently institutionalized when their obsolescence is tolerated and they grow obsolete beyond repair.


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