Growth-induced crises and transitions in the governance of firm organizations

Ulrich Witt and Hagen Worch

Journal of Economic Behavior & Organization, 2023, vol. 212, issue C, 1182-1191

Abstract: This paper discusses why organizational growth can cause crises in the governance of firms, how such crises typically unfold, and what options for responding they leave for management. More specifically, focus is on growth-induced changes in how the governance of an organization coordinates its members on, and motivate them to contribute to, the pursuit of the common purpose. As outlined by means of two distinct examples, governance approaches differ with respect to the solution of coordination and motivation problems. Nonetheless, when the organization size grows, adaptations in the firm members’ cognitive and motivational attitudes occur and tend to similarly undermine the governance of the organization. As a consequence, confusion, frictions, and internal rivalries increase and work effort declines. The unfolding of such crises is shown to be a case of a self-organizing criticality, a unique feature of nonlinear dynamics. Once the crisis has emerged, the cognitive and motivational conditions characterizing the outmoded governance approach constrain the options for making a transition to one that is better suited for the growing number of employees. Failure to accomplish such a transition results in any case in a state of muddling through with an outmoded governance approach that jeopardizes profitability and, in the longer run, the existence of the firm.

Keywords: Firm governance; Organizational growth; Growth crises; Self-organizing criticality; Cognitive alignment; Work motivation (search for similar items in EconPapers)
Date: 2023
References: View references in EconPapers View complete reference list from CitEc
Citations:

Downloads: (external link)
http://www.sciencedirect.com/science/article/pii/S0167268123002342
Full text for ScienceDirect subscribers only

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:eee:jeborg:v:212:y:2023:i:c:p:1182-1191

DOI: 10.1016/j.jebo.2023.07.001

Access Statistics for this article

Journal of Economic Behavior & Organization is currently edited by Houser, D. and Puzzello, D.

More articles in Journal of Economic Behavior & Organization from Elsevier
Bibliographic data for series maintained by Catherine Liu ().