Daniel A Levinthal

Daniel A Levinthal and Dong Nghi Pham (2024), Bringing politics back in: The role of politics and coalitions in organizational adaptation, Organization Science, (forthcoming) ().

Abstract: The discussions of organizational politics and processes of organizational adaptation have developed as largely independent streams of work. However, we suggest that organizational politics—in particular, the power dynamics of the dominant coalition—can be a driver for patterns of both “continuity and change” within organizations. Continuity is maintained by two inertial forces. First, a corporate strategy that conforms to the interest of the dominant coalition will tend to reinforce the power of that dominant coalition—an entrenchment effect. Second, even organizational units that were not initially part of the dominant coalition adapt their policies to that corporate strategy and, as a consequence, may come to support this status quo strategy. However, the political dynamics within the organization can also facilitate strategic change because shifts in the environment can alter the power structure of the organization, resulting in a new dominant coalition with a different agenda. The underlying basis is that organizations are multilevel systems in which subunits adapt to the organization’s strategy, and that strategy, in turn, adapts to the subunits’ current policies. We find that a self-interested political process can help “unfreeze” the alignment between subunit policies and an organization’s strategy in a changing environment, facilitating a more timely adaptive response than a strategy process based on the perceived collective interest of the organization as a whole. However, under high levels of goal conflict among subunits, coalitional power inhibits, rather than facilitates, adaptive change because of the entrenchment effect of power.

Daniel A Levinthal and Daniel A. Newark (2023), Putting the individual in the context of the organization: A Carnegie perspective on decision-making, Frontiers of Psychology, 14 ().

Abstract: The majority of decision research portrays decision-makers as largely decontextualized, separate from the institutional and social factors that influence their choosing. On the occasions when context is considered, it is rarely organizational, despite the prominence of organizations in people’s lives. By contrast, the Carnegie perspective on decision-making emphasizes context, particularly that of organizations, as a central concern. We develop this contrast by first reviewing the limited role of context in neoclassical economic and psychological depictions of choice. Next, we present key elements of the organizational decision context in the Carnegie perspective: decision premises, standard operating procedures and decision rules, organizational structures, learning environments, and identity–situation interaction. We then consider the importance of interpretation to decision-making in context. In particular, rather than being given and clear, the meaning of decision context is often ambiguous and must be interpreted or constructed. The Carnegie perspective underscores the importance of this interpretive process to both decision-making and everyday life. We conclude by considering aspects of context that merit greater examination, as well as the implications for behavioral theorizing of acknowledging the contextualized nature of action.

Jaeho Choi and Daniel A Levinthal (2023), Wisdom in the wild: Generalization and adaptive dynamics, Organization Science, 34 (3), pp. 1073-1089.

Abstract: Learning from experience is a central mechanism underlying organizational capabilities. However, in examining how organizations learn from past experiences, much of the literature has focused on situations in which actors are facing a repeated event. We direct attention to a relatively under-examined question: when an organization experiences a largely idiosyncratic series of events, at what level of granularity should these events, and the associated actions and outcomes, be encoded? How does generalizing from experience impact the wisdom of future choices and what are the boundary conditions, or factors that might mitigate the degree of desired generalization? To address these questions, we develop a computational model that incorporates how characteristics of opportunities (cf., acquisition candidates, new investments, product development) might be encoded so that experiential learning is possible even when the organization’s experience is a series of unique events. Our results highlight the power of learning through generalization in a world of novelty, as well as the features of the problem environment that reduce this “power.”

Ozgecan Kocak, Daniel A Levinthal, Phanish Puranam (2023), The dual challenge of search and coordination for organizational adaptation: How structures of influence matter, Organization Science, 34 (2), pp. 851-869.

Abstract: Organizations increasingly need to adapt to challenges in which search and coordination cannot be decoupled. In response, many have experimented with “agile” and “flat” designs that dismantle traditional forms of hierarchy to harness the distributed knowledge of specialized individuals. Despite the popularity of such practices, there is considerable variation in their implementation as well as conceptual ambiguity about the underlying premise. Does effective rapid experimentation necessarily imply the repudiation of hierarchical structures of influence? We use computational models of multiagent reinforcement learning to study the effectiveness of coordinated search in groups that vary in how they influence each other’s beliefs. We compare the behavior of flat and hierarchical teams with a baseline structure without any influence on beliefs (a “crowd”) when all three are placed in the same task environments. We find that influence on beliefs—whether it is hierarchical or not—makes it less likely that agents stabilize prematurely around their own experiences. However, flat teams can engage in excessive exploration, finding it difficult to converge on good alternatives, whereas hierarchical influence on beliefs reduces simultaneous uncoordinated exploration, introducing a degree of rapid exploitation. As a result, teams that need to achieve agility (i.e., rapid satisfactory results) in environments that require coordinated search may benefit from a hierarchical structure of influence—even when the apex actor has no superior knowledge, foresight, or capacity to control subordinates’ actions.

Daniel A Levinthal (2021), From Arms to Trees: Opportunity Costs and Path-Dependence and the Exploration-Exploitation Tradeoff, Strategy Science, 6 (4), pp. 331-337.

Abstract: The literature on the exploration-exploitation tradeoff has anchored on the n-armed bandit problem as its canonical formal representation. This structure, however, omits a fundamental property of evolutionary dynamics. Contrary to a bandit formulation, foregoing an opportunity may negate the possibility of engaging in that opportunity in the future --- not just modifying the beliefs about the attractiveness of engaging in that opportunity. Thus, the bandit structure only incorporates path-dependence with respect to beliefs, and not with regard to capabilities as our usual conceptions of dynamics of learning and capabilities would suggest. Further, the consideration of opportunity cost is rather static and does not address the dynamic unfolding of opportunity structures. The nature of path-dependence and opportunity costs are used to frame many of our existing conceptualizations of search processes and firm dynamics, including bandit models, real options, pivoting, the “secretary problem”, and “island” models of firm diversification. The discussion points to the need to develop canonical models of what evolutionary biologists’ term phylogenetic trees and opens up a set of new questions, such as what is the degree of parallelism of trajectories that is possible within an organization, what is the fecundity of different trajectories in terms of likelihood of branching possibilities arising, how are these latent branching opportunities accessed?

Daniel A Levinthal (2021), Evolutionary Processes and Organizational Adaptation: A Mendelian Perspective on Strategic Management, Oxford University Press.

Abstract: Strategists are encouraged to identify sustained competitive advantages. This volume takes a different tact and provides a perspective on how organizations adapt over time to changing circumstances. This process is characterized as not driven by the inspired wisdom of a grand strategist, but by an ecology of initiatives within the organization. A central role of the organization is to mediate between the market forces in which it operates and the culling and amplification of these initiatives within the organization. In this spirit, a useful touchstone is that of Mendel, who sits intermediate between the blind watchmaker of a purely Darwinian process and a “chess master” strategist as suggested by stylized rational choice approaches. The “Mendelian executive” operates with intentionality, but this intentionality is with respect to the design of the experimental process rather than the identification of specific pathways forward. The two core conceptual pillars of the work are that of path-dependence, what are the adjacent “spaces” to which an organization might move, and “artificial selection,” how the organization mediates aggregate immediate outcomes and the allocation of resources and rewards to the various initiatives and actors within the organization. Entities that have a sustained lifespan are not static, but engage in processes of renewal, whether cells in the human body or lines of business within a firm. A conceptual framework is provided to illuminate some of the fundamental mechanisms underlying this process.

Daniel A Levinthal and C. Rerup (2021), The Plural of Goal: Learning in a World of Ambiguity, Organization Science, 32 (3), pp. 527-543.

Abstract: In the Carnegie School tradition of experiential learning, learning processes are driven by the encoding of performance outcomes as a success or failure relative to a goal. We expand this line of inquiry by highlighting how conflicting and thus ambiguous outcomes across multiple goals make interpretation a critical aspect of organizational learning processes. In early work in the Carnegie tradition, interpretation played a role in the demarcation between what constituted success or failure on a given outcome metric. However, in March’s latter writings, learning and decision making produce an arena or even an opportunity for generating interpretations and broader meanings regarding roles, values, and identities. We explore how the two interpretive approaches in March’s work play out across three modes of responses to ambiguity. First, the process of self-enhancement whereby participants interpret conflictual outcomes so that they, the participants, appear in a positive light. Second, an explicit political process regarding the contestation of how to interpret conflicting outcomes. Third, from the perspective of the organizations’ literature on wisdom, participants may embrace ambiguity either to enhance learning or simply to enrich individuals’ interpretation of their experiences. Although these three modes of response do not offer a complete set of responses for learning in a world of ambiguity, they constitute valuable touchstones for the perspective we wish to put forward and, collectively, help enrich our understanding of the role of learning, ambiguity and interpretation within the Carnegie School.

Daniel A Levinthal and Andrea Contigiani (2018), Situating the Construct of Lean Startup: Adjacent “Conversations” and Possible Future Directions, Industrial and Corporate Change.

Daniel A Levinthal (2017), Mendel in the C-Suite: Design and the evolution of strategies, Strategy Science, 2 (4), pp. 282-287.

Abstract: A “Mendelian” executive is proposed as an image of strategy making that lies intermediate between the godlike powers of intentional design of rational choice approaches and a Darwinian process of random variation and market-based differential selection. The Mendelian executive is capable of intentional design efforts in order to explore possible adjacent strategic spaces. Furthermore, the argument developed here highlights the role of intentionality with respect to the selection and culling of strategic initiatives. The firm is viewed as operating an “artificial selection” environment in contrast to selection as the direct consequence of the outcome of competitive processes. Examining the nature of the processes generating these experimental variants and the bases of internal selection, and how these selection criteria may themselves change, is argued to be central to the formation of strategy in dynamic competitive environments.

Daniel A Levinthal (2017), Resource allocation and firm boundaries, Journal of Management, 43 (8), pp. 2580-2587.

Abstract: In a modern economy, much of the allocation of financial and nonfinancial resources is mediated by organizations. This essay points to three general features of this mediating role of organizations in the resource allocation process. One line of argument relates to the distinct opportunities and opportunity costs that an organization faces. The set of investment opportunities for organizations differs as a result of their privileged access to different investment opportunities. The second line of argument considers the impact of differential beliefs and perspectives on the resource allocation process. The diversity of independent budgetary entities, both internal to and external to the organization, is argued to importantly influence the heterogeneity of the bases of selection among alternative investment opportunities. Lastly, this mediation of resource allocation by the firm plays a particularly important role with respect to the allocation of resources over time on a given initiative. Organizations do not simply buffer initiatives from selection but potentially provide different bases for interim selection processes.