Memory and organizational evolvability in a neutral landscape

Abstract

Many organizational theories are not sanguine over the chances of organizations to adapt and evolve, even if they should learn from the past through memory. Innovative search in the adaptive biology tradition leads quickly to dead ends. However, memory is useful for rendering innovative search more efficient. The concept from evolutionary biology of neutrality and drift along neutral pathways introduces the possibility that organizations are robust to local innovations and therefore potential candidates for evolvability. Through simulations in a neutral NK hypercube, our analysis shows that neutrality does not create value when future payoffs are discounted and change is costly. Here is the role for memory. Memory enables the faster development of better capabilities and reverses the negative assessment of evolvability. Even when allowing for forgetting, memory is a positive capability that improves evolvability of organizations so they can achieve better performance and better ways of doing so. Memory and neutrality are complementary for creating organizational evolvability, a finding consistent with the overwhelming evidence that organizations are more productive today than before because of innovation. © 2014 INFORMS.