Abstract
Research has shown that past organizational success leads to strategic persistence, which, in constantly changing environment, might be dysfunctional, and might lead to organizational demise. Such phenomenon was termed as “paradox of success” (Audia & Locke, 2000). Adopting a managerialist view, this paper attempts to explain the paradox of success from a managerial cognition perspective. A system dynamics model is formalized to replicate the paradox of success and to incorporate the process of knowledge structure formation in the top management team. The key to the survival in face of major environmental changes is the awareness of the knowledge structure appropriateness, and the promptness in updating the knowledge structure. One way to safeguard knowledge structure appropriateness is to maintain sufficient degree of heterogeneity of knowledge structure in top management team. The model generates several propositions: (1) The tradeoff between top management team heterogeneity and effectiveness makes cohesive structure a suboptimal choice in stable environment. (2) In fact of major environmental changes, firm performance suffers the most when the knowledge structure of the top management team is converging; firms with loosely coupled knowledge structures in top management team are more responsive and adaptable to changes, thus exhibiting better performance. (3) The benefits of reserving certain heterogeneity in managerial knowledge structure in case of major environmental changes outweigh the benefits of converging knowledge structure to achieve high performance in stable environment. The expected results, taken together, will provide some insights in how to manage firms in face of major changes by maintaining sufficient heterogeneity in knowledge struc ...