Organizational Identity and Adaptation to Discontinuous Change: The Role of Focus and Locus

Organizational identity has been envisaged as a critical precursor of organizational adaptation. However, the various dimensions of identity and their precise influence on organizations’ responses to discontinuous technologies remain underexplored. Using field data on the responses of German publishing houses to the emergence of digitization, we provide an explorative basis to fill this gap. Our analysis suggests that two dimensions of organizational identity exist, each having different main effects: focus, which ranges from inclusive to exclusive, significantly affects the degree to which companies adopt the new technology or do not; locus of identity, which may be self- or environment-related, is strongly associated with the speed of the response to discontinuous change. We then explore the interactive effect of identity focus and locus on incumbent adaptation. Our inquiry reveals that each of the four focus-locus combinations shows an idiosyncratic pattern of adaptation regarding the response timing, the activeness versus passiveness of the response, and, where applicable, the precise type of active response strategy. Our research adds to the emerging stream of research on cognitive determinants of organizational adaptation and is one of the first empirical studies to explain incumbent response heterogeneity through the lens of organizational identity.