ASSESSING ORGANIZATIONAL FITNESS ON A DYNAMIC LANDSCAPE - AN EMPIRICAL-TEST OF THE RELATIVE INERTIA THESIS

This paper proposes an empirical framework for evaluating the relative structural inertia hypothesis, a central assumption of organizational ecology theories. In stark contrast to the tenets of strategic manage ment, the relative inertia thesis claims that organizations are typica lly unable to match structural changes to their competitive environmen ts in a timely fashion. The hypothesis is tested for the hospital indu stry in California during the 1980-90 time frame. Strategic movements in a competition 'landscape' are tracked using a variant of the Jaccar d similarity coefficient, which has been applied in numerous studies o f biological competition. Findings indicate that few hospitals are abl e to overcome inertial forces in adapting their service portfolios; fu rthermore, the ability of hospitals to strategically reposition themse lves decreases markedly with provider density. Analyses also investiga te the relation between organizational attributes (e.g., age, size, mi ssion, and portfolio scope) and adaptability. Implications for both ec ological and strategic theory are pursued. (C) 1997 John Wiley & Sons, Ltd.