Abstract for: Decision Rules and Organziational Dynamics

What forces shape the dynamics of individual organizations and the dynamics of organizational populations? We look at how much difference exists in firms' decision rules and how those differences help explain differences in the patterns of growth and decline among competing firms. Using a large data set of German consumer magazines - observed quarterly from 1972 to 2006 - we estimate and compare magazines' decision rules on a few key dimensions: pricing to advertisers; pricing to readers; and the number of editorial pages to be included in the magazine. We then embed these rules into a system dynamics model of magazine operations developed by Hall (1976) to evaluate how fully differences in decision rules explain differences in firm dynamics. Our hope is that this style of research, taking rich models based on case studies of individual organizations and generalizing them to explain the varied dynamics of entire populations of organizations, will have two contributions. First, it will show the extent to which differences in rules in organizations explain differences in organizational dynamics. Second, it will allow us to leverage the body of existing carefully executed SD case studies into a broader and still richer basis for understanding firm dynamics.