Becoming the best: by beating or ignoring the best? Toward an expanded view of the role of managerial selection in complex and turbulent environments

TLDR: In simple and stable environments, organizational adaptation is enhanced by an external focus but in complex and turbulent environments, such external focus is counterproductive and the ability of organizations to adapt is conditioned as much or more by the focus of search than by its scope.

Abstract: This paper explores how the rules that guide search affect organizational adaptation in complex and turbulent environments. Our consideration of such rules extends beyond search scope—i.e., exploitation of current technologies vs. exploration of new technologies—to include focus on competition. We consider two types of competitive focus—i.e., external, where the choice of focal technology to be improved is influenced by information about other organizations and internal, where it is not influenced by others. We refer to this expanded set of rules as managerial selection and vary it to explore how it affects organizational adaptation. Employing an agent based simulation model, built on the framework of NKC fitness landscapes, we consider multiple types of interdependencies within and between technologies and across competitors. We show that in the presence of these multiple interdependencies, the ability of organizations to adapt is conditioned as much or more by the focus of search than by its scope. In particular, we observe that in simple and stable environments, organizational adaptation is enhanced by an external focus but in complex and turbulent environments, such external focus is counterproductive.