Optimal Inertia: When Organizations Should

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Advances in Strategic Management

ISSN: 0742-3322
Series editor(s): Professor Brian Silverman

Subject Area: Strategy

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Document Information:
Title:	Optimal Inertia: When Organizations Should
Author(s):	Nick Dew, Brent Goldfarb, Saras Sarasvathy
Volume:	23 Editor(s): Joel A.C. Baum, Stanislav D. Dobrev, Arjen Van Witteloostuijn ISBN: 978-0-76231-338-9
Citation:	Nick Dew, Brent Goldfarb, Saras Sarasvathy (2006), Optimal Inertia: When Organizations Should, in Joel A.C. Baum, Stanislav D. Dobrev, Arjen Van Witteloostuijn (ed.) Ecology and Strategy (Advances in Strategic Management, Volume 23), Emerald Group Publishing Limited, pp.73-99
DOI:	10.1016/S0742-3322(06)23003-1 (Permanent URL)
Publisher:	Emerald Group Publishing Limited
Article type:	Chapter Item
Abstract:	We challenge the premise that the CEO's job is to keep the corporation alive and thriving at all costs and under all circumstances. We briefly review the differing normative views of strategic management theorists and organizational theorists about organizational inertia. We then develop an economic model of incumbent behavior in the face of challenger competition that accommodates complementary assets. The model predicts and describes conditions under which organizational inertia, as subsequent organizational failure, is optimal. We then extend the logic and propose that the failure of entrepreneurial firms does not necessarily imply the failure of entrepreneurs. We conclude with a call to study “exit” as a viable strategic option.