What the Folk Theorem doesn’t tell us

In 1968, Sid Winter wrote a wonderful essay inspired by two chapters of Schumpeter’s (Winter, 2006). It will not surprise anyone familiar with the next four decades of Sid’s work that his concerns in 1968 included mundane change as well as the cataclysmic variety. That is, I read Sid (then and later) as interested in routine production as well as in technological change and industry evolution. It will also not surprise such readers that Sid focused more on what I will loosely call the informational difficulties of mundane change and routine production, rather than on the incentive difficulties. Indeed, in footnote 8 he explicitly sidestepped consideration of “vested interests in the old way of doing things.” That footnote (together with its successors across the decades) creates my opportunity. In this short celebratory essay, I will try to make two points. First, an important message that I have taken from Sid’s work is that mundane change and routine production are anything but. Second, I think it is time to bring interests back into our thinking about the difficulties of mundane change and routine production. To make these two points, I begin with a shockingly incomplete review of empirical work that persuades me to conjecture that there may be persistent performance differences among seemingly similar enterprises (PPDs among SSEs). I then sketch one sense of “vested interests” and suggest that we now have some of the tools to explore how such interests might increase the difficulty of organizational change (and hence partially account for PPDs among SSEs). But, in the main focus of this essay, I next sketch another sense of vested interests and suggest both that this is where new tools need to be built and that the payoff from doing so might be quite high. In particular, whereas the first sense of vested interests and the associated collection of existing tools may help us analyze the political impediments to change, my hope is that the second sense of vested interests and the associated tools that need to be built will provide important insights into the organizational capabilities that may account for some PPDs among SSEs.