Defining the construct
Robert Duncan's 1972 work on perceived uncertainty separated static from dynamic environments. Gregory Dess and Donald Beard later proposed three broad dimensions of a firm's environment, and dynamism became a standard variable. It captures instability and unpredictability, rather than merely growth.
- Munificence: the resources available to support growth
- Dynamism: the degree of unpredictable change
- Complexity: the range and diversity of relevant factors
Why it matters for decisions
Dynamic settings are often thought to change which management practices succeed. Kathleen Eisenhardt's case studies of high-velocity firms found that faster strategic decision makers used more information and considered more alternatives at once, against the common assumption that speed requires less analysis. Researchers often treat dynamism as a moderator that may strengthen or weaken the payoff of planning, innovation, or decentralized structure.
Measurement and mixed findings
Dynamism may be measured through managers' perceptions or via objective indicators such as volatility in industry sales. The two do not always agree, and they answer different questions, since managers act on what they perceive. Results on whether formal planning helps or hurts in dynamic markets are inconsistent, and small case studies may not generalize. Selection effects also complicate interpretation, as firms that fail in turbulent markets disappear from later samples.
Further reading
- Duncan, R. B. (1972). Characteristics of organizational environments and perceived environmental uncertainty. Administrative Science Quarterly, 17(3).
- Dess, G. G., & Beard, D. W. (1984). Dimensions of organizational task environments. Administrative Science Quarterly, 29(1).
- Eisenhardt, K. M. (1989). Making fast strategic decisions in high-velocity environments. Academy of Management Journal, 32(3).