Strategic Management Theory in a Post‐Pandemic and Non‐Ergodic World

By Michael A. Hitt, J. Arrégle, R. M. Holmes. Journal of Management Studies, 2020

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This quote, written 30 years ago, describes the pandemic environment in which the world exists today. As Meyer et al. (1990) explained, such quantum discontinuous changes require entrepreneurial responses. In the ongoing Covid-19 pandemic, firms must devise strategies to deal with short-term discontinuities and significant uncertainty to survive. After the pandemic eases, longer-term strategic changes may be needed to navigate the competitive landscape arising in the ‘New Normal’ which has resulted from technological, socio-political, and institutional changes (Ahlstrom et al., 2020) that resemble the causes of environmental jolts explained by Meyer et al. (1990). This New Normal is unlikely to be a static equilibrium, because the pandemic shock has triggered another unexpected dynamic. As Nobel Laureate Douglass North (1999) explained, we now exist in a non-ergodic world in which the new equilibrium after major disruptions continues to change thereafter, similar to dynamic equilibria in open systems. Thus, firms need new and more flexible strategies to achieve what North described as adaptive efficiency. While it is unclear which changes caused by the pandemic will persist, it seems evident that certain aspects of the business environment will change with the current crisis serving as a tipping point. Hence, this new environment (during the pandemic and thereafter) begs the question ‘How does strategic management theory help us understand how firms Journal of Management Studies ••:•• 2020 doi:10.1111/joms.12646

Subfields: Economics and Econometrics, Strategy and Management

View Paper: https://www.semanticscholar.org/paper/ff3606bc1660cd6f4c10fe0154e80c71719e6aa9