Assessing organizational fitness on a dynamic landscape: an empirical test of the relative inertia thesis

This paper proposes an empirical framework for evaluating the relative structural inertia hypothesis, a central assumption of organizational ecology theories. In stark contrast to the tenets of strategic management, the relative inertia thesis claims that organizations are typically unable to match structural changes to their competitive environments in a timely fashion. The hypothesis is tested for the hospital industry in California during the 1980–90 time frame. Strategic movements in a competition ‘landscape’ are tracked using a variant of the Jaccard similarity coefficient, which has been applied in numerous studies of biological competition. Findings indicate that few hospitals are able to overcome inertial forces in adapting their service portfolios; furthermore, the ability of hospitals to strategically reposition themselves decreases markedly with provider density. Analyses also investigate the relation between organizational attributes (e.g., age, size, mission, and portfolio scope) and adaptability. Implications for both ecological and strategic theory are pursued. © 1997 John Wiley & Sons, Ltd.