A MULTIDIMENSIONAL CONCEPTUALIZATION OF ENVIRONMENTAL VELOCITY

Academy of Management Review
2010, Vol. 35, No. 4, 604–626.

A MULTIDIMENSIONAL CONCEPTUALIZATION
OF ENVIRONMENTAL VELOCITY
IAN P. MCCARTHY
THOMAS B. LAWRENCE
BRIAN WIXTED
BRIAN R. GORDON
Simon Fraser University

Environmental velocity has emerged as an important concept but remains theoreti-
cally underdeveloped, particularly with respect to its multidimensionality. In re-
sponse, we develop a framework that examines the variations in velocity across
multiple dimensions of the environment (homology) and the causal linkages between
those velocities (coupling). We then propose four velocity regimes based on different
patterns of homology and coupling and argue that the conditions of each regime have
important implications for organizations.

Environmental velocity1 has become an im- integration (Smith et al., 1994); rapid organiza-
portant concept for characterizing the conditions tional adaptation and fast product innovation
of organizational environments. Bourgeois and (Eisenhardt & Tabrizi, 1995); and the use of heu-
Eisenhardt (1988) introduced this concept to the ristic reasoning processes (Oliver & Roos, 2005).
management literature in their study of strate- More generally, research on velocity has shown
gic decision making in the microcomputer in- that it affects how managers interpret their en-
dustry. They described this industry as a “high- vironments (Nadkarni & Barr, 2008; Nadkarni &
velocity environment”— one characterized by Narayanan, 2007a), further highlighting the ef-
“rapid and discontinuous change in demand, fects of environmental dynamism on key orga-
competitors, technology and/or regulation, such nizational members (Dess & Beard, 1984).
that information is often inaccurate, unavail- A common feature of the treatment of environ-
able, or obsolete” (Bourgeois & Eisenhardt, 1988: mental velocity in the literature has been the
816). From the perspective that the environment use of singular categorical descriptors to char-
is a source of information that managers use to acterize industries—most typically as “low,”
maintain or modify their organizations (Aldrich, “moderate,” or “high” velocity (e.g., Bourgeois &
1979, Scott, 1981), velocity has important impli- Eisenhardt, 1988; Eisenhardt, 1989; Eisenhardt
cations for organizations. Studies have found, & Tabrizi, 1995; Judge & Miller, 1991; Nadkarni &
for example, that success in high-velocity indus- Narayanan, 2007a,b). Although Bourgeois and
tries is related to fast, formal strategic decision- Eisenhardt (1988) defined environmental veloc-
making processes (Eisenhardt, 1989; Judge & ity in terms of change (rate and direction) in
Miller, 1991); high levels of team and process multiple dimensions (demand, competitors,
technology, and regulation), research on veloc-
ity has tended to overlook its multidimensional-
We are grateful to associate editor Mason Carpenter and ity, instead assuming that a single velocity can
three anonymous reviewers for their helpful and construc- be determined by aggregating the paces of
tive comments. The development of this paper also benefited
from comments from Joel Baum, Danny Breznitz, Sebastian
change across all the dimensions of an organi-
Fixson, Mark Freel, Rick Iverson, Danny Miller, Dave zation’s environment. This assumption over-
Thomas, Andrew von Nordenflycht, Mark Wexler, Carsten looks the fact that environmental velocity is a
Zimmermann, and seminar participants at Simon Fraser vector quantity jointly defined by two attributes
University and the 2008 INFORMS Organization Science Pa- (the rate and the direction of change) and that
per Development Workshop. We are also grateful to the
Canadian Social Sciences and Humanities Research Coun-
organizational environments are composed of
cil for funding that supported this research. multiple dimensions, each of which may be as-
1
To increase the paper’s readability, we use the terms sociated with a distinct rate and direction of
environmental velocity and velocity interchangeably. change.
604
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2010 McCarthy, Lawrence, Wixted, and Gordon 605

In this paper we aim to advance understand- studies characterizing velocity as simply high or
ing of environmental velocity by developing a low. Specifically, we explain how the multidi-
theoretical framework that articulates its multi- mensionality of velocity can affect the degree to
dimensionality and by exploring the implica- which an organization’s activities will be en-
tions of this framework for understanding the trained and adjusted over time. We then high-
organization-environment relationship. We ar- light how these implications apply to two pro-
gue that while there may be cases in which cesses that have been central to prior research
organizational environments can be accurately on velocity: strategic decision making and new
specified by a single descriptor (e.g., high veloc- product development.
ity), a multidimensional conceptualization Our exclusive focus on environmental velocity
opens up a number of opportunities. First, it differs from prior research that has sought to
provides a basis for more fine-grained descrip- characterize organizational environments in
tions of the patterns of change that occur in terms of a set of core properties—most com-
organizational environments. An understanding monly some variation of complexity, dynamism,
of a firm’s environmental velocity as composed and munificence (Aldrich, 1979; Dess & Beard,
of multiple, distinct rates and directions of 1984; Scott, 1981). In pursuing this aim, we rec-
change across multiple dimensions allows us to ognize the trade-offs among generalizability, ac-
move beyond characterizations of industries as curacy, and simplicity (Blalock, 1982) inherent in
high or low velocity and the assumption that all examining one aspect of the environment in
dimensions change at similar rates and in sim- depth while bracketing other important environ-
ilar directions (Bourgeois & Eisenhardt, 1988; mental dimensions. Research focused on the
Eisenhardt, 1989; Judge & Miller, 1991; Smith et general organizational environment has strived
al., 1994). Perhaps most important in this regard, for “high levels of simplicity and generalizabil-
a multidimensional conceptualization allows ity, with a corresponding sacrifice of accuracy”
for an examination of the relationships among (Dess & Rasheed, 1991: 703). This approach has
the dimensions of velocity, which we argue can been characterized as “collapsing” the hetero-
have a profound impact on organizations. geneity of the environment into a more parsimo-
Second, a multidimensional conceptualiza- nious set of properties (Keats & Hitt, 1988). In
tion of velocity offers a foundation for more con- contrast, we focus on a single specific aspect of
sistent operationalizations of the construct, environmental dynamism—velocity—and ex-
which would help improve the reliability and plore in detail its dimensions, how the velocities
validity of research that employs it. Our review of these dimensions vary and interact, and the
of the environmental velocity literature indi- consequences of those differences and interac-
cates a reliance on singular descriptors of ve- tions. Our approach follows other studies that
locity, which has led to inconsistent operation- have examined specific environmental con-
alizations of the construct. Thus, while it has structs, such as uncertainty (Milliken, 1987) and
sometimes been claimed that people can recog- munificence (Castrogiovanni, 1991). An impor-
nize a high-velocity environment when they see tant consequence of focusing on a single aspect
one (Judge & Miller, 1991), the different ways that of the environment is that any normative or pre-
the velocity of the same industry has been cat- dictive claims we make must be made with ce-
egorized by different researchers would seem to teris paribus restrictions placed on them. This,
indicate otherwise. Such inconsistencies may be of course, complicates the application of such
due to focusing on one or two particularly sa- claims in research or practice but also allows a
lient velocity dimensions or to combining data deeper examination of specific phenomena (Pi-
for multiple velocity dimensions without consid- etroski & Rey, 1995).
ering the aggregation errors that can occur if the We present our arguments as follows. First,
dimensions do not perfectly covary. we review the concept of environmental velocity
Finally, by understanding that the environ- as it has been developed in management re-
ments of organizations have multiple, distinct search, focusing on the opportunities that this
velocities, it is possible to identify different pat- work presents for developing a multidimen-
terns of environmental velocity whose condi- sional conceptualization. Second, we present
tions affect organizations in ways that go be- our framework by defining several fundamental
yond the insights that have emerged from dimensions of the organizational environment

606 Academy of Management Review October

and defining the key aspects of velocity—the dustry context, the level (high, moderate, or low)
rate and direction of change—for each dimen- of velocity considered, and the measures em-
sion. Third, we examine the potential relation- ployed (if any). Looking across these studies, we
ships among velocity dimensions (such as prod- identify three themes that characterize much of
ucts and technology) by introducing three the existing research in the area and provide the
concepts: (1) “velocity homology,” which is the motivation for the theoretical framework that we
degree to which velocity dimensions have sim- develop.
ilar rates and directions of change at a point in First, existing studies have predominantly fo-
time; (2) “velocity coupling,” which is the degree cused on high-velocity environments, with lim-
to which the velocities of different dimensions ited attention to other potential patterns of ve-
affect one another over time; and (3) “velocity locity. Consequently, we know relatively little,
regimes,” which represent patterns of velocity for instance, about the velocity-related chal-
homology and velocity coupling. Fourth, we ex- lenges faced by firms operating in low-velocity
plore the implications of our framework for or- environments, where the slow pace of change
ganization-environment relationships and for may be associated with protracted development
strategic decision making and new product lead times, long decision horizons, and rela-
development. tively infrequent feedback. Also, and more gen-
erally, the focus on high-velocity environments
may be a significant factor in the treatment of
ENVIRONMENTAL VELOCITY IN
velocity in terms of singular categorical descrip-
MANAGEMENT RESEARCH
tors; the term high-velocity environment itself
In physics, velocity refers to the rate of dis- seems to imply that multiple dimensions of the
placement or movement of a body in a particular environment (e.g., products, markets, technol-
direction. Thus, it is a vector quantity jointly ogy) combine nonproblematically to produce a
defined by two distinct attributes: the rate of single, cumulative, high level of velocity. While
change and the direction of change. The defini- this may be true in some cases, it is not clear
tion of high-velocity environments articulated that it applies broadly across firms and
by Bourgeois and Eisenhardt (1988) captured industries.
these two attributes, referring to rapid and dis- Second, high-velocity environments are often
continuous change in multiple dimensions of presented as synonymous with high-technology
the environment, such as demand, competitors, industries, perhaps because Bourgeois and
technology, and regulation. The notion of high Eisenhardt’s initial study focused on the early
velocity provided an evocative way to charac- microcomputer industry. Industries have been
terize the fast-moving, high-technology industry categorized as high velocity simply because
that was the context of their studies, and it com- they are technology intensive (Smith et al., 1994)
plemented a number of similar but conceptually or are built around an evolving scientific base
distinct environmental constructs, including dy- (Eisenhardt & Tabrizi, 1995), regardless of
namism (Baum & Wally, 2003; Dess & Beard, whether other environmental dimensions ex-
1984; Lawrence & Lorsch, 1967), turbulence (Em- hibit low or modest rates of change or relatively
ery & Trist, 1965; Terreberry, 1968), and hypertur- continuous directions. Judge and Miller (1991),
bulence (McCann & Selsky, 1984). More recently, for instance, identified the biotechnology indus-
environmental velocity has been used in con- try as high velocity, despite its relatively long
junction with or as a synonym for other related product development lead times and product
environmental constructs, such as “clockspeed” life cycles (both ten to twenty years).
(i.e., the speed of change in an industry; Fine, Finally, existing research tends to lack an ex-
1998; Nadkarni & Narayanan, 2007a,b) and hy- plicit measurement model or justification for the
percompetition (Bogner & Barr, 2000; D’Aveni, categorization of specific organizational con-
1994). texts or industries. Instead, researchers declare
Table 1 lists some of the major studies in stra- that they are studying high-velocity environ-
tegic management and organization theory in ments and reiterate Bourgeois and Eisenhardt’s
which the concept of environmental velocity (1988) original definition without significant ex-
plays a central role. For each study the table planation or direct evidence (the studies by
delineates the phenomenon of interest, the in- Judge and Miller [1991] and Nadkarni and Barr


TABLE 1
Environmental Velocity in Management Research
Management/Organization Level of Velocity Velocity Measures
Example Studies Phenomena (Industry Context) Conceptualization of Velocity Used

Bourgeois & Pace and style of strategic High (microcomputer Uniform change in the rate and Illustrative statistics
Eisenhardt (1988) decision making industry) direction of demand, and examples
competition, technology, and
regulation
Eisenhardt & Politics of strategic decision High (microcomputer As per Bourgeois & Eisenhardt Illustrative statistics
Bourgeois (1988) making industry) (1988) and examples
Eisenhardt (1989) Rapid strategic decision making High (microcomputer As per Bourgeois & Eisenhardt Illustrative statistics
industry) (1988) and examples
Judge & Miller Antecedents and outcomes of High (biotechnology), Aggregation of industry growth Industry data and
(1991) decision speed medium (hospital), and perceived pace of survey data from
and low (textile) technological, regulatory, firms
and competitive change
Smith et al. (1994) The effect of team demography High (informational, Rate of change in product, Illustrative statistics
and team process electrical, demand, and competition
biomedical,
environmental)
Eisenhardt & Rapid organizational adaptation High (computer) As per Bourgeois & Eisenhardt Illustrative statistics
Tabrizi (1995) and fast product innovation (1988) and examples
Brown & Continuous organization change High (computer) As per Bourgeois & Eisenhardt Illustrative statistics
Eisenhardt (1997) (1988) and examples
Stepanovich & Strategic decision-making High (health care) Rate of change in demand, An illustrative
Uhrig (1999) practices competition, technology, and example
regulations
Bogner & Barr Cognitive and sensemaking High (IT) A form of hypercompetition None
(2000) abilities
Oliver & Roos Team-based decision making High (toys and IT Rate of change and the time None
(2005) tools) available to make decisions
Brauer & Schmidt Temporal development of a High and low A form of dynamism and Industry market
(2006) firm’s strategy (industries not volatility returns data
implementation specified)
Davis & Shirato A firm’s propensity to launch High (computer), The number of product lines R&D expenditure/
(2007) World Trade Organization medium (auto), and and the rate of product total revenue
actions low (steel) turnover
Nadkarni & How cognitive construction by High (computers, Rate of change (clockspeed) for Industry clockspeeds
Narayanan firms drives industry velocity toys) and low product, process, and organi-
(2007a) (aircraft, steel) zational dimensions
Nadkarni & Relationship between strategic High (computers, The rate of industry change Industry clockspeeds
Narayanan schemas and strategic toys) and low (clockspeed)
(2007b) flexibility (aircraft, steel)
Nadkarni & Barr How velocity affects managerial High (semiconductor, As per Bourgeois & Eisenhardt A review of existing
(2008) cognition, which in turn cosmetic) and low (1988) literature and
affects the relationship (aircraft, matching using
between industry context and petrochemical) industry attributes
strategic action
Davis, Eisenhardt, The performance and structural High and low The speed or rate at which new A Poisson
& Bingham implications of velocity (conceptual opportunities emerge in the distribution of new
(2009) simulation model) environment opportunities

[2008] representing notable exceptions). This has equated velocity with the speed at which
variation in the extent to which velocity has new opportunities emerge (Davis, Eisenhardt, &
been operationalized has resulted in some coun- Bingham, 2009).
terintuitive and inconsistent categorizations of Looking across these themes, we see that re-
industry velocity. Studies of health care, for in- search on environmental velocity has provided
stance, have labeled those environments as interesting and influential insights, particularly
both high velocity (Stepanovich & Uhrig, 1999) into the nature of organizational processes op-
and moderate velocity (Judge & Miller, 1991). erating in fast-changing, high-technology in-
Furthermore, our understanding of velocity and dustries. We suggest, however, that the con-
its effects across industry contexts has largely struct itself requires a more fine-grained
focused on only one attribute of velocity—the examination, since existing research tends to
rate of change—since prior research has tended assume that it can be adequately represented
to use measures associated with the clockspeed by an aggregation of the rates of change across
of an industry (e.g., Nadkarni & Narayanan, different environmental dimensions or by a fo-
2007a; Oliver & Roos, 2005; Smith et al., 1994) or cus on change in only one dimension of the


environment to the exclusion of others. In con- In order to describe the direction of change in
trast, we believe that a multidimensional con- a way that allows comparison across industry
ceptualization of velocity would provide a dimensions, we follow Bourgeois and Eisen-
stronger foundation for clarifying and opera- hardt (1988), who suggest that the direction of
tionalizing its characteristics and for better change varies in terms of its degree of continu-
understanding its diversity and impacts on ity-discontinuity. They argue that continuous
organizations. change represents an extension of past devel-
opment (e.g., continuously faster computer tech-
nology), whereas discontinuous change repre-
ENVIRONMENTAL VELOCITY AS A
sents a shift in direction (the move from film to
MULTIDIMENSIONAL CONCEPT
digital photography, or the shifts that occur in
The core understanding of environmental ve- fashion industries). Discontinuities, therefore,
locity that we propose is that organizational en- can be represented by inflection points in the
vironments are composed of multiple dimen- trajectories that describe change in a dimension
sions, each of which is associated with its own over time (e.g., technology price-performance
rate and direction of change. This simple notion, curves or demand curves for specific products).
we argue, has profound effects on how we un- To more fully articulate a continuum of con-
derstand and research velocity and on the or- tinuous-discontinuous change, we draw on
ganizational reactions to velocity we expect and Wholey and Brittain’s (1989) three-part concep-
prescribe. In this section we begin to construct tualization of environmental variation, arguing
our theoretical framework, first by defining the that the direction of change is discontinuous to
basic concepts of rate of change and direction of the extent that shifts in the trajectory of change
change as they apply to the organizational en- are more recurrent, with greater amplitude and
vironment in general, and then by describing with greater unpredictability over a period of
how these basic concepts apply to some primary time. This approach helps us distinguish be-
dimensions of the organizational environment. tween relatively regular, predictable (e.g., sea-
sonal) variations in environmental velocity and
irregular types of change that are more difficult
The Rate and Direction of Change
to predict and, consequently, more challenging
Environmental velocity is a vector quantity in terms of organizational responses (Milliken,
defined by the rate and direction of change ex- 1987). We suggest that such variations in the
hibited by one or more dimensions of the orga- continuity-discontinuity of a velocity dimen-
nizational environment over a specified period. sion’s trajectory allow for the use of structural
The rate of change is the amount of change in a equation modeling (Kline, 2004) and difference
dimension of the environment over a specified scores (Edwards, 1994) to produce growth models
period of time, synonymous with such concepts that measure transitions in change over time
as pace, speed, clock rate, or frequency of (Bliese, Chan, & Ployhart, 2007; Singer & Willett,
change. The direction of change, while often 2003).
mentioned in studies citing Bourgeois and Furthermore, to operationalize the rate and
Eisenhardt’s (1988) definition, has attracted rel- direction of change of each velocity dimension,
atively little attention beyond that. One possible we suggest that the measures will require scale
reason for this is the relative difficulty of de- uniformity to allow the relative differences be-
scribing the direction of environmental change. tween the dimensions to be compared and cor-
Whereas the velocity of a physical object can be related (Downey, Hellriegel, & Slocum, 1975; Mil-
described simply as moving eastward at 50 km/ liken, 1987). To achieve this, we suggest that the
hr, similarly straightforward descriptions of the rate and direction of change will be some form
direction of change of an organizational envi- of scalar measure (e.g., change/time). Therefore,
ronment are not so obvious. This is particularly even though what is changing will vary for each
the case when we consider the direction of of the dimensions, their relative rates and direc-
change across different industry dimensions, tions of change can be determined and com-
such as products, technology, and regulation, pared by using the same period of time for the
the direction of each of which could be de- different dimensions (i.e., new products per year
scribed in numerous distinct ways. and changes in product direction per year).


Dimensions of Environmental Velocity duction processes and component technologies
that underlie a specific industrial context, such
The second way in which we break down the
as float glass technology in glass manufactur-
concept of environmental velocity is in terms of
ing, genetic engineering in the biotechnology
the dimensions of the organizational environ-
industry, and rolling mills in metals processing.
ment that are changing. While the dimensions
of the environment that are salient for any par- See Table 2 for a summary of the definitions for
ticular study will vary according to the specifics each of the velocity dimensions on which we
of the research project, there are several that focus.
have been widely used in prior research on or- The rate of technological change is the
ganizational environments. We use the four di- amount of change in those technologies over a
mensions suggested by Bourgeois and Eisen- specific time period, including the creation of
hardt (1988)— demand, competitors, technology, new technologies, the refinement of existing
and regulation—and to this list we add a fifth technologies, and the recombination of compo-
dimension—products. We do this because prior nent technologies. The rate of technological
research on environmental velocity has tended change varies dramatically across industries.
to merge the technology and product dimen- Drawing on patents as an indicator of the rate of
sions, and we argue that they often have dissim- technological change, one can argue, for in-
ilar rates and directions of change, which makes stance, that the electronics industry exhibits a
separating them important for our purposes. more rapid rate of technological change than
Archibugi and Pianta (1996) point to the impor- does the oil industry. In 2006, rankings for the
tance of this distinction when they argue that number of patents granted in the United States
product changes need not be technical but can showed that the top five positions were held by
also include changes in the aesthetic, branding, electronics companies, whereas the oil industry
or pricing features of a product. Our discussion firms Shell and Exxon occupied positions 126
of environmental dimensions is not meant to be and 139, respectively (IFI, 2008). Although some
exhaustive; rather, it is meant to highlight the technological change is either not patentable or
heterogeneity of environmental dimensions that not patented for strategic reasons, the rate of
motivates our development of a multidimen- patenting can nevertheless provide a useful in-
sional conceptualization of velocity. dication of the technological rate of change
Technological velocity. Technological velocity since it is a relatively direct and publicly avail-
is the rate and direction of change in the pro- able indicator of the proprietary technological

TABLE 2
Environmental Velocity: Dimension Definitions and Example Measures
Definition/Example
Measures Technological Product Demand Regulatory Competitive

Velocity dimension The rate and direction The rate and direction The rate and direction The rate and direction The rate and direction
definition of change in the of change in new of change in the of change in laws of change in the
production product willingness and and regulations that structure of
processes and introductions and ability of the market affect an industry competition within
component product to pay for goods an industry
technologies that enhancements and services
underlie a specific
industrial context
Example measures The number of new The number of new The change in The number of new The change in
of the rate of patents and products introduced industry sales in a and amended laws industry population
change in the copyrights granted in a given period given period and/or regulations size and density
dimension in a given period (i.e., product introduced in a (i.e., number and
clockspeed) given period size of firms) in a
given period
Example measures The changes in the The change in the The change in the The change in the The change in
of the direction direction of the nature of product trend (e.g., growth nature and scope of industry growth
of change in the relationship features as versus decline) and the control provided trends (e.g., growth
dimension between the price perceived by the nature (e.g., by new laws and versus decline) in a
and technical market in a given personal versus regulations in a given period
performance of period impersonal) of given period
technology in a demand in a given
given period period


outputs of an industry (Archibugi & Pianta, 1996; tion points with respect to price (in 1981 and
Griliches, 1990). 1988) and no major inflection points with respect
The direction of technological change refers to to performance. In contrast, fashion products,
the trajectories along which technological ad- such as clothing, music, and travel, all change
vancements take place (Abernathy & Clark, frequently through the creation of new products
1985; Dosi, 1982; Tushman & Anderson, 1986). Dis- and the transformation and repackaging of ex-
tinguishing between continuous and discontin- isting ones. Such variations in product change
uous directions of technological change is most across industries are associated with differ-
easily understood in terms of performance/price ences in the complexity, risk, and impact of the
curves. Continuous technological change in- product change.
volves a series of improvements that enhance While velocity research has often lumped to-
the performance of the technology (e.g., ad- gether product and technological velocities, our
vances in photographic film technology focused definitions of their rates and directions of
on improving contrast quality, light sensitivity, change illustrate the importance of distinguish-
and speed). Such changes move a technology ing between them. Over the past several de-
smoothly along a performance/price curve, usu- cades, for example, the underlying materials
ally at a decreasing rate, thus creating a con- and production processes in the automobile
cave downward performance/price curve. In industry have changed more rapidly and dis-
contrast, discontinuous technological change continuously than have the end products them-
involves “architectural” (Henderson & Clark, selves. In contrast, textile production technolo-
1990) or “radical” innovations that “dramatically gies have changed more slowly and
advance an industry’s price vs. performance continuously than the fashion products they are
frontier” (Anderson & Tushman, 1990: 604). These used to create.
innovations temporarily alter the shape of the Demand velocity. Demand velocity is the rate
performance/price curve such that it becomes and direction of change of the willingness and
concave upward until the immediate benefits of ability of the market to pay for goods or services,
the innovation are exhausted. including changes in the number and types of
Product velocity. This dimension is the rate transactions and market segments. The rate of
and direction of new product introductions and change in demand varies tremendously across
product enhancements. We define products as industries, with some experiencing rapid
any combination of ideas, services, and goods growth or decline and others facing steady
offered to the market (Kotler, 1984). The rate of growth for years. Such variance is influenced by
change in products can vary tremendously a wide range of factors, including changes in
across industries and across market segments taste, new rival products, substitutes, comple-
within an industry. In terms of the former, Fine ments, changes in relative prices, business cy-
(1998) and Nadkarni and Narayanan (2007a,b) cle fluctuations, and switching costs. Empirical
show that the movie, toy, and athletic footwear research has used summary industry sales fig-
industries have relatively high rates of product ures as an indicator of the rate of change in
change (new products launched every three to demand (e.g., Bourgeois & Eisenhardt, 1988).
six months), whereas the aircraft, petrochemi- The direction of change for demand is contin-
cal, and paper industries have low rates of prod- uous when there is a steady progression of in-
uct change (new products launched every ten to creasing or decreasing sales to a consistent set
twenty years). of consumers. Conversely, change in the direc-
The direction of change for products can be tion of demand is discontinuous when there are
described as continuous when new product infrequent, significant, unpredictable shifts in the
troductions represent improvements on previ- growth, decline, or steady state of demand, or a
ously important product attributes, and discon- radical change in the segments that compose
tinuous when the new products introduce the overall market. For example, demand veloc-
fundamentally new attributes for consumer ity in the U.S. restaurant industry from 1970 to
choice. Adner and Levinthal’s (2001) study of the 1995 was relatively continuous, with sales gains
personal computer industry between 1974 and made nearly every year during that period (Har-
1998 provides an example of relatively continu- rington, 2001). In contrast, the demand for com-
ous product change, with only two major inflec- modities, such as copper and gold, can be


highly volatile owing to a wide range of macro- ment (Bowman & Gatignon, 1995). Such mea-
economic influences, exemplifying the case of a sures describe the overall pace at which the
discontinuous demand velocity. Similarly, the competitive conditions that define an industry
Nintendo Corporation created discontinuous are changing—a factor that has been shown to
change in the demographics of demand since its influence firm performance across a wide range
Wii games console appealed to nontraditional of industries, including the automotive (Hannan,
market segments, such as families, women, and Carroll, Dundon, & Torres, 1995), computer (Hen-
older people. derson, 1999), and insurance (Ranger-Moore,
Regulatory velocity. We define regulatory ve- 1997) industries.
locity as the rate and direction of change in the The direction of change in competitive struc-
regulations and/or laws that directly affect the ture involves continuity-discontinuity with re-
firm or industry under consideration. This in- spect to the value chain in an industry (Jaco-
cludes government action (e.g., changes in laws, bides & Winter, 2005), the nature of rivals (Porter,
regulations, and polices) and industry self- 1980; Schumpeter, 1950), or changes in market
regulation (e.g., voluntary standards and codes). contestability (Hatten & Hatten, 1987). Change in
It is a dimension that can open or close markets, competitive structure is continuous to the de-
present organizations with compliance costs, gree that these characteristics remain constant
and necessitate strategic shifts in practices. The and stable over time. Conversely, the change in
rate of regulatory change is a function of the direction in competitive structure is discontinu-
creation of new laws or regulations, or changes ous to the degree that industry value chains are
to existing laws or regulations, in a time period. in flux (Jacobides, 2005) and existing bases of
It can vary greatly across industrial, national, competition are challenged by firms introducing
and historical contexts, and it often depends on new products, pioneering new markets or
other factors, such as technology (e.g., regula- sources of supply, or implementing new means
tions for stem cell research), business scandals of production (Schumpeter, 1950).
(e.g., the Enron scandal), health and safety is-
sues (e.g., mad cow disease), and demographic
RELATIONSHIPS AMONG VELOCITY
shifts (e.g., an increase in the retired
DIMENSIONS: VELOCITY HOMOLOGY,
population).
VELOCITY COUPLING, AND
The direction of change in regulation is con-
VELOCITY REGIMES
tinuous to the degree that new regulations re-
semble the old in scope, form, or substantive An important benefit of a multidimensional
areas of concern, and it is discontinuous to the conceptualization of environmental velocity is
degree that they address new issues, focus on the potential it provides to examine the differ-
different kinds of behaviors, or employ new prin- ences and relationships among the velocities of
ciples. For example, the U.S. airline industry different dimensions. To that end, we introduce
from 1938 to 1975 experienced changes in regu- three concepts: (1) velocity homology—the rela-
lations that were relatively continuous, in that tive similarity among the rates and directions of
the Civil Aeronautics Board (CAB) restricted change of different dimensions; (2) velocity cou-
prices, flight frequency, and flight capacity pling—the degree to which the velocities of dif-
(Vietor, 1990). Then, in 1975, the direction of reg- ferent dimensions are causally connected; and
ulatory change changed as the CAB began ex- (3) velocity regimes—the different patterns of
perimenting with limited deregulation, and in environmental velocity that emerge from varia-
1978 the industry was completely deregulated tions in velocity homology and velocity
and the CAB abolished. coupling.
Competitive velocity. Competitive velocity is
the rate and direction of change in the structural
Velocity Homology
determinants of industry profitability (Barney,
1986; Porter, 1980). Its rate of change is, in part, a The term homology was coined by the paleon-
function of the entrance and exit of industry tologist Richard Owen (1843) to explain the mor-
rivals (Hannan & Carroll, 1992), as well as the phological similarities among organisms. It has
speed with which firms respond to competitors’ been used by management scholars to describe
strategic moves or other shifts in the environ- the degree to which two phenomena are similar


(Chen, Bliese, & Mathieu, 2005; Glick, 1985; Han- Shook, 1996), factor analysis (Segars & Grover,
lon, 2004) and is consistent with the homogene- 1993), and multidimensional scaling (Cox & Cox,
ity-heterogeneity aspect of environmental com- 2001), all of which are considered suitable for
plexity (Aldrich, 1979; Dess & Beard, 1984). In our assessing interdimension similarity in construct
framework, velocity homology is the degree to composition (Harrison & Klein, 2007; Law, Wong,
which the rates and directions of change of dif- & Mobley, 1998).
ferent dimensions are similar to each other over An assumption of a highly homologous set of
a period of time. Thus, “high homology” de- velocities typified much of the early work on
scribes a condition in which the velocities of high-velocity environments, in which industries
different dimensions in a given environment ex- such as microcomputers were characterized by
hibit relatively similar rates and directions of “rapid and discontinuous change” across multi-
change, whereas “low homology” describes rel- ple dimensions (Bourgeois & Eisenhardt, 1988:
atively dissimilar rates and directions of 816). An assumption of high homology carried
change. over to subsequent studies, with limited consid-
To help explain velocity homology, we present eration of the degree to which homology might
a map of the velocities of different dimensions, vary across firms and industries. Most studies
with the rate of change and the direction of seem to have aggregated the velocities of differ-
change on each axis (see Figure 1). With this ent dimensions, regardless of the variance
image of velocity (based on the fashion apparel among these dimensions, thereby assuming
industry example we present in the following similarity (i.e., high homology in our terms)
sections), homology is represented by the close- among the velocities of different environmental
ness of the points. Thus, low homology (as is the dimensions. Consequently, we know relatively
case in Figure 1) is represented by relatively little about the conditions and effects of low-
spread out points, and high homology would be homology environments, where the velocity
represented by relatively tightly clustered properties of a firm’s multiple environmental di-
points. To operationalize this concept of homol- mensions are highly dissimilar.
ogy, we suggest using distance measures and To illustrate and clarify the concept of homol-
methods, such as cluster analysis (Ketchen & ogy, we present the example of the apparel in-

FIGURE 1
Fashion Apparel Industry Example

Discontinuous
Demand

Competitive Product
Direction of
change

Technological
Regulatory
Continuous

Low Rate of High
change
Key: The solid lines indicate tight coupling and the dashed lines loose coupling.


dustry and focus on the industry segment in- over the past twenty or so years—toward greater
volved in the design and supply of seasonal automation and efficiency in textile manufac-
fashion apparel. This includes brands sold pri- turing, more rapid response to customer de-
marily through own-brand stores (e.g., Gap, mands, and more efficient communication and
Zara, and American Apparel) and brands sold coordination in fashion design and retailing
through a mixture of own-brand stores and in- (Doeringer & Crean, 2006; The Economist, 2005).
dependent stores (e.g., Armani, Benetton, and In contrast to product and technological veloc-
Levi’s). We chose this industry because aca- ities, regulatory change in this industry has, for
demic studies and business reports suggest that the past two decades, occurred relatively slowly
from 1985 through 2005 the velocities of different and continuously. The regulation that affects
dimensions in this industry spanned a diverse this industry most significantly is directed at the
range of rates and directions of change (Djelic & manufacture of clothing and the protection of
Ainamo, 1999; The Economist, 2005; Jacobides & consumer rights, both of which have changed
Billinger, 2006; Taplin & Winterton, 1995). slowly over that period. With respect to the man-
Beginning with the product dimension, this ufacture of garments, the Multi Fibre Arrange-
segment of fashion retailing is associated with ment (MFA) was introduced in 1974 as a short-
a relatively high rate of change and a moder- term measure to govern world trade in textiles
ately discontinuous direction. This is illustrated and garments, imposing quotas on the amount
by the operations of Zara, one of Europe’s lead- developing countries could export to developed
ing fashion brands. Zara launches some 11,000 countries (Spinanger, 1999). This regulation un-
new products annually, most of which are com- derwent only minor modifications until it ex-
pletely new products as perceived by the cus- pired in 2005 (Audet & Safadi, 2004). National-
tomer and typically take only five weeks from level regulation tends to focus on labor and
design to retail store (The Economist, 2005). Even employment standards. In response to the shift
casual fashion houses, such as Sweden’s of clothing manufacturing from developed to
Hennes & Mauritz (H&M) and the American emerging economies, the governments of West-
chain Gap, roll out between 2,000 and 4,000 prod- ern nations have been reluctant to further regu-
ucts each year. Moreover, the rate of change in late (and potentially stifle) clothing manufactur-
products has increased, with the emergence of ing, much of which occurs as home-based work
“fast fashion” as a dominant strategy for mass (Ng, 2007).
market designers/retailers (Doeringer & Crean, Change in demand for fashion apparel has,
2006). We argue that the direction of product for the past twenty years, occurred moderately
change is moderately discontinuous, because slowly, with a high degree of discontinuity. Re-
although these firms launch many new prod- searchers argue that the fashion industry is
ucts, they represent a mix of new items and characterized by low to moderate levels of pos-
extensions of existing products. This view is itive sales growth each year (Nueno & Quelch,
consistent with studies of the rate and direction 1998), with occasional major demographic and
of change in women’s formal wear (Lowe & lifestyle shifts and changes in customer prefer-
Lowe, 1990). ences (Danneels, 2003; Siggelkow, 2001). Al-
The technologies that underpin the fashion though the direction of change in demand for
industry have been changing rapidly over the fashion has oscillated between relative stability
past twenty years (cf. Richardson, 1996) but at a and discontinuity over the last 150 years (Djelic
relatively slower rate than changes in fashion & Ainamo, 1999), the past 20-year period has
products. Although manufacturing technology been associated with customers becoming more
in the apparel industry has remained stable for demanding, arbitrary, and heterogeneous
nearly a century (Audet & Safadi, 2004), there (Djelic & Ainamo, 1999; The Economist, 2005).
have been advances in the manufacture of tex- The competitive velocity of the fashion indus-
tiles, as well as in communication and informa- try has long fascinated observers. In recent
tion technologies, that have facilitated the move years it has altered as increased cost pressures
to quick response (Forza & Vinelli, 1997) and fast have led firms to engage in rapid-fire attempts
fashion (Doeringer & Crean, 2006) strategies in to source the lowest-cost materials and to move
fashion design and retailing. The direction of labor-intensive aspects of the value chain to
these changes has been relatively continuous countries with lower costs. The industry has also


experienced constant shifts in the major centers change in the velocity of one dimension causes
of production (Dosi, Freeman, & Fabiani, 1994). a change in the velocity of another.
By way of example, U.S. employment levels in Weick (1976) defined loosely coupled systems
this sector in 2002 were a third of what they were as those in which the properties of constitutive
in the early 1980s (Doeringer & Crean, 2006). The elements are relatively independent, whereas
intersection of cost pressures and the increasing the properties of elements in tightly coupled sys-
rate of change in consumer preference and de- tems are strongly mutually dependent. Weick
mand has led to significant shifts in firms’ strat- (1982) further argued that loose coupling in-
egies, particularly speeding up the supply chain volves causal effects that are relatively periodic,
(Richardson, 1996) and altering organizational occasional, and negligible, whereas tight cou-
structures and boundaries (Djelic & Ainamo pling involves relatively continuous, constant,
1999; Jacobides & Billinger, 2006; Siggelkow, and significant causal effects. Thus, we de-
2001). Such conditions characterize change that scribe the velocities of different dimensions of a
is both moderately rapid and continuous in firm’s environment as loosely coupled when
nature. changes in the velocity of one dimension (e.g.,
The fashion industry points to two important technology velocity) have relatively little imme-
issues with respect to understanding homology diate, direct impact on the velocities of other
among environmental velocity dimensions. dimensions (e.g., product velocity), and we de-
First, it highlights that the organizational envi- scribe them as tightly coupled when the rela-
ronment is composed of a number of distinct tionship between the velocities of different di-
dimensions, each of which is defined by its own mensions involve significant immediate, direct
rate and direction of change— or velocity. Sec- causal effects. To determine the degree of cou-
ond, we see that there are significant differ- pling between velocity dimensions, we suggest
ences in the rates and directions of change (low using structural equation modeling (Kline, 2004),
homology) across the five dimensions that we which is recommended for operationalizing co-
have considered. This makes the idea of de- variance between construct variables (Law et
scribing the industry as having a single veloc- al., 1998).
ity, whether based on an “average” across di- Although coupling and homology both de-
mensions or on the velocity of whichever scribe the relationships among velocity dimen-
dimension might be considered most important, sions, they are separate, distinguishable as-
misleading both to researchers attempting to pects of those relationships. The velocities
understand the industry and to managers need- of different dimensions can have high levels of
ing to make strategic decisions. interdependence (coupling), regardless of
whether they exhibit similar rates and direc-
tions of change (homology). Homology is a first-
order property of velocity, describing the simi-
Velocity Coupling
larity among velocities over a period of time. In
A second important aspect of the relationship contrast, coupling is a second-order property,
between velocity dimensions is the degree to describing the degree to which changes in the
which and the ways in which they interact over velocity of a dimension affect the velocity of
time. We examine these interactions through the another dimension over the same specified pe-
concept of coupling. This is the degree to which riod of time. The distinction between homology
elements of a system, including product compo- and coupling is observable in the biotechnology
nents (Baldwin & Clark, 1997; Sanchez & Ma- industry, which experiences high rates and dis-
honey, 1996), individuals (DiTomaso, 2001), or- continuous directions of technological change
ganizational subunits (Meyer & Rowan, 1977; but relatively slow, continuous regulatory and
Weick, 1976, 1982), and organizations (Afuah, product velocities (Zollo, Reuer, & Singh, 2002).
2001; Brusoni, Prencipe, & Pavitt, 2001), are caus- While these dimensions have very different ve-
ally linked to each other (Orton & Weick, 1990; locities (low homology), there is evidence to sug-
Weick, 1976). In our framework velocity coupling gest that they are relatively tightly coupled. This
is the degree to which the velocities of different is illustrated by the impacts of the 2001 U.S.
dimensions in an organizational environment regulation on stem cell research, which re-
are causally connected—the degree to which a stricted research to twenty-one stem cell lines (a


family of constantly dividing cells) and, in turn, in their study of the U.S. fashion apparel indus-
limited the rate and direction of U.S. stem cell try in the 1980s, Abernathy, Dunlop, Hammond,
research activity (i.e., technological velocity) rel- and Weil (1999) explain how changes in demand
ative to other countries. In 2009 this regulation led to “lean retailing,” which, in turn, required
was overturned, permitting research on up to firms to drastically alter their information and
1,000 new stem cell lines, allowing “U.S. human production technologies to enable new working
embryonic stem-cell research to thrive at last” practices. In contrast, there is little evidence to
(Hayden, 2009: 130). suggest that changes in the velocity of technol-
We again draw on the fashion apparel indus- ogy for the fashion industry will affect or are
try to illustrate the idea of coupling among ve- affected by changes in the velocities of compe-
locity dimensions. Beginning with products, tition or regulation.
changes in the velocity of this dimension have In this illustrative example (see Figure 1), we
been attributed to increases in the adoption of argue that seven of ten possible dyadic connec-
new communications, design, and manufactur- tions among velocity dimensions are relatively
ing technologies, suggesting a relatively tight tightly coupled (designated by solid lines) such
coupling between product and technological ve- that changes in the velocity of one dimension
locity dimensions. Perhaps most significant, will affect the velocity of another. We have ar-
changes in the direction of technology have im- gued that the three other connections are
proved the ability of fashion apparel firms to loosely coupled, as indicated by the dotted
gather market feedback and, thus, to develop lines. Thus, although not all of the velocity di-
new product offerings at a faster rate (Jacobides mensions of the fashion industry exhibit strong
& Billinger, 2006; Kraut, Steinfield, Chan, Butler, causal connections to each other, we suggest
& Hoag, 1999; Richardson, 1996). Similarly, the that this industry can be described as a rela-
velocity of demand has been tightly coupled to tively tightly coupled environment. Any assign-
product velocity over the past two decades: in- ment of such a category is somewhat arbitrary
dustry observers argue that the perceived new without a formal measurement of coupling, so
arbitrariness of customer demand has forced for now we follow work on modular (loosely cou-
fashion organizations to frequently engage in pled) and integrated (tightly coupled) organiza-
large-scale market explorations (Cammet, 2006; tional forms that suggests that when at least 50
Jacobides & Billinger, 2006). In contrast, there is percent of the system elements are tightly cou-
little evidence of a strong relationship between pled to each other, the system can be considered
product velocity and competitive velocity. Prod- tightly coupled (Schilling & Steensma, 2001).
uct velocity appears to be primarily driven by
changes in market demand and the product in-
novation programs of existing organizations ex-
Velocity Regimes
ploiting those changes, as opposed to a flow of
new entrants (Cammet, 2006). We propose the concept of a velocity regime
In terms of the velocity of regulation in this as a way to describe the pattern of velocity ho-
industry, there is evidence that it is tightly cou- mology and velocity coupling within an organi-
pled to the velocities of competition, demand, zational environment. Although both these char-
and products, with changes in international acteristics of velocity vary continuously, we
trade regulations (Spinanger, 1999) and domes- focus on combinations of high or low homology
tic labor standards (Ng, 2007) leading to increas- and tight or loose coupling to more clearly illus-
ing imports from developing economies, both trate how they vary and the effects of these
creating and satisfying the demand for cheaper variations. The result is a typology (see Figure 2)
fashion products. Similarly, the velocities of with four distinct velocity regimes that repre-
competition and demand appear to be tightly sent ideal types, rather than an exhaustive tax-
coupled, with firms in this industry attempting onomy of velocity conditions. To illustrate and
to predict and adapt to what Siggelkow (2001) visualize the degrees of homology and coupling
calls “fit-destroying changes” that can signifi- that characterize each regime, we have embed-
cantly alter their competitive positions. There is ded a variation of Figure 1 into each cell of
also tight coupling between the velocity of tech- Figure 2. Like Figure 1, these embedded figures
nology and the velocity of demand. For example, present illustrative sets of velocities, the rela-


FIGURE 2
Environmental Velocity Regimes

Conﬂicted velocity regime Integrated velocity regime

R D
Tight
R D
Direction Direction
C C
of change of change
T
P

T
P

Velocity Rate of change Rate of change
coupling

Divergent velocity regime Simple velocity regime

R D

Direction R D
Direction
of change C
of change C
Loose T
P
T
P

Rate of change Rate of change

Low Velocity High
homology
Key: T technological velocity, R regulatory velocity, D demand velocity, C competitive velocity, and P product
velocity. The solid lines indicate tight coupling and the dashed lines loose coupling.

tive positions of which indicate their rates and An example of a simple velocity regime is the
directions of change for different dimensions. U.K. tableware industry from the mid 1950s to
The first velocity regime in our typology oc- the late 1970s. During this period, this industry
curs when environmental dimensions are highly was exposed to changes in regulations, de-
homologous and loosely coupled to each other. mand, product, technology, and competition that
We call this the “simple velocity regime” be- were all relatively slow and continuous in na-
cause it has similar rates and directions of ture (Imrie, 1989; Rowley, 1992). At the same time,
change across all dimensions. Thus, regardless this industry had relatively loose coupling
of whether these dimensions are all changing among velocity dimensions. For example, when
slowly and continuously or rapidly and discon- change did occur in the velocity of the product
tinuously, we argue that it is the relative unifor- dimension during the 1970s, due to an increase
mity of the change in strategic information that in the rate at which product variety and customi-
makes the environment relatively analyzable zation changed, the only other velocity dimen-
(Daft & Weick, 1984). Furthermore, because the sion to be affected was technology, whereby
velocities of the multiple dimensions are loosely changes in the flexibility of production machin-
coupled, they are free to vary independently so ery altered at a similar rate (Carroll, Cooke,
that changes in the velocity of one dimension Hassard, & Marchington, 2002; Day, Burnett, For-
are unlikely to affect the velocities of other rester, & Hassard, 2000). This combination of
dimensions. high homology and loosely coupled dimension


velocities created an environment that analysts products were developed, which, in turn, af-
and scholars described as being uniformly sta- fected the rate at which new market segments
ble, consistent, and regular in nature (Imrie, were created (Bresnahan & Malerba, 1999; Lan-
1989). glois, 1990). This coupling among dimensions
The second environmental velocity regime in also brought about the wholesale change in the
our typology occurs when the velocities of dif- velocities that occurred around 1995 as the in-
ferent dimensions are highly homologous and dustry began its fourth era—the age of the net-
tightly coupled. This creates what we call an work (Malerba et al., 1999).
“integrated velocity regime.” This regime is in- The third velocity regime, which we call the
tegrated in two senses: the velocity attributes “divergent velocity regime,” has a set of dissim-
of each dimension (i.e., rates and directions of ilar and loosely coupled velocities, so firms face
change) are very similar, and the velocities of diverse and possibly contradictory environmen-
the dimensions are highly interdependent on tal conditions. This potentially makes the envi-
each other for a period of time. The tight cou- ronment more difficult to analyze, because some
pling differentiates this regime from the simple dimensions change slowly and continuously—
regime, presenting managers with the complex generating modest amounts of information—
task of monitoring and responding to causally while other dimensions change rapidly and dis-
connected changes in a velocity. This is what continuously—producing large quantities of
Aldrich (1979: 77) calls the “everything’s related information that quickly becomes inaccurate or
syndrome,” where a change in the velocity of obsolete. This set of dissimilar velocities pre-
one dimension reverberates throughout the ve- sents diverse temporal demands on the informa-
locities of other dimensions. Together, these tion processing and sensemaking abilities of
conditions create an environment that is best managers. The relatively loose coupling among
understood as having, at least for a time, a sin- these dissimilar velocities, however, somewhat
gle overarching velocity. Moreover, if all the di- lessens the challenge of monitoring and re-
mensions are changing rapidly and discontinu- sponding to environmental conditions, because
ously, this situation will be exemplified by the changes in the velocities of different dimensions
“high-velocity” industries that have dominated are relatively independent, limiting the poten-
research on environmental velocity. tial for rapid, widespread change in the flows of
Consequently, an example of an integrated strategic information.
velocity regime is the global computer industry An example industry of this regime would be
from approximately 1982 to 1995. During this pe- the U.S. flat glass manufacturing industry from
riod, which is known as the third era of the 1955 to 1975. During this period, the environmen-
industry, the microprocessor and personal com- tal dimensions for this industry had very differ-
puter were invented (Malerba, Nelson, Orsenigo, ent and unconnected velocities. The technology—
& Winter, 1999), and most of the environmental float glass production methods—that was
dimensions were changing rapidly and in a dis- developed to produce flat glass was adopted
continuous direction. Firms were frequently en- relatively quickly during this period compared
tering and exiting the industry, as well as form- to other process technology innovations (Teece,
ing and breaking alliances with each other 2000). It was also a discontinuous change that
(Bresnahan & Malerba, 1999; Langlois, 1990). revolutionized how flat glass was made, with
Technological substitution in hardware and productivity gains approaching 300 percent as
software was a frequent occurrence, resulting in the need for grinding the glass was eliminated
regular product innovations (Bourgeois & Eisen- (Anderson & Tushman, 1990). This led to signifi-
hardt, 1988; Brown & Eisenhardt, 1997). While cant price/performance improvements so that
Eisenhardt and colleagues clearly argued that float glass products replaced existing flat glass
such conditions equated to multiple velocities products in a relatively rapid and continuous
undergoing similar “rapid and discontinuous fashion, rising from 30 million square feet per
change,” we suggest there was also a signifi- year of glass in 1960 to 1,730 million square feet
cant level of interdependence among the veloc- per year of glass in 1973 (Bethke, 1973). Because
ities of these dimensions. For example, studies this change in demand was generated by exist-
have explained how the velocity of competition ing producers for existing automotive and con-
affected the rate at which new technologies and struction customers, the pace and direction of


competitive change remained relatively slow the implications of velocity homology and veloc-
and continuous in nature. The only significant ity coupling in terms of their general impacts on
regulatory event for this industry was that the organizing and on the processes of strategic de-
U.S. Tariff Commission and Treasury more fre- cision making and new product development.
quently cited foreign producers for dumping flat
glass on the U.S. market at prices lower than
Implications of Velocity Homology
those in their own markets (Bethke, 1973). This
link between the rate of government action and We argue that the notion of velocity homol-
the increase in production capacity from the ogy significantly affects how we need to think
new technology appears to be the only major about the relationship between an organization
interdependency between the different veloci- and the temporal characteristics of its environ-
ties of the dimensions for this industry during ment. The dominant notion that has emerged
this period. over the past two decades in the velocity litera-
The final velocity regime we propose is com- ture, and more broadly in research on time and
posed of dimensions whose velocities are rela- organizations, has been the importance of orga-
tively dissimilar and tightly coupled. We call nizations operating “in time” with their environ-
this the “conflicted velocity regime,” since orga- ments and in synchrony across their subunits
nizations operating with such a regime will ex- and activities. This is the view of research on
perience diverse and potentially contradictory organizational “entrainment” (Ancona & Chong,
velocities that are also highly interdependent. 1996; McGrath, Kelly, & Machatka, 1984; Perez-
´
As in the case of the divergent regime, the low Nordtvedt, Payne, Short, & Kedia, 2008), which
level of homology among velocity dimensions in argues that “functional groups not only must be
the conflicted velocity regime leads to condi- [internally] entrained with each other for the
tions that are, as a whole, inconsistent and rel- organization to work, there must also be exter-
atively unanalyzable. However, the tight cou- nal entrainment, at both the subsystem and sys-
pling among these heterogeneous velocities tem levels, to ensure adaptation to the environ-
increases the difficulty associated with track- ment” (Ancona & Chong, 1996: 19). The impact of
ing, understanding, and responding to changes external entrainment on performance is echoed
in the conditions of this regime, because the in research on high-velocity industries, which
causal variation makes the environment rela- argues that organizational performance in such
tively unstable over time. Although neglected in environments is associated with rapid decision
the velocity literature, we believe that this kind making (Eisenhardt, 1989) and fast new product
of velocity regime may be quite common. Our development (Eisenhardt & Tabrizi, 1995;
example of the fashion industry since the mid Schoonhoven, Eisenhardt, & Lyman, 1990). In
1980s illustrates the dynamics associated with their discussion of “timepacing,” Eisenhardt and
the conflicted velocity regime. We argued that Brown (1998) provide examples of the impor-
the rates and direction of change in this industry tance of external entrainment, including the
span a diverse range. We further argued that household goods manufacturer that timed its
this industry’s environmental dimensions are product launch cycles to key retailers’ shelf
relatively tightly coupled. Such conditions de- planning cycles and, thus, was able to win more
fine an environment with a set of dimensions shelf space.
that are not only changing dissimilarly but are Our multidimensional conceptualization of
also highly interdependent. velocity suggests that temporal alignment be-
tween an organization’s operations and its en-
vironment is critically important but that varia-
ORGANIZATIONAL AND
tions in homology create significant limits to the
STRATEGIC IMPLICATIONS
synchronization of activities within firms (inter-
The importance of environmental velocity is nal entrainment). If the velocities associated
due to the impacts it has on key organizational with different environmental dimensions are
and strategic processes. Thus, in this section we similar, as in our high-homology regimes (sim-
examine how a multidimensional conceptual- ple and integrated), then it is appropriate to
ization of environmental velocity would affect entrain the pace and direction of all organiza-
our understanding of these impacts. We explore tional activities to this uniform environmental


velocity. This will be a relatively simple situa- A second key strategic process that illustrates
tion to manage. However, if the dimension ve- the implications of velocity homology is new
locities differ significantly, as in our low- product development—the set of activities that
homology regimes (conflicted and divergent), transforms ideas, needs, and opportunities into
then the situation will be more difficult to man- new marketable products (Cooper, 1990). Previ-
age. This is because the task of entraining or- ous research has shown the value of rapid new
ganizational activities with dissimilar dimen- product development in high-velocity industries
sion velocities will lead to heterogeneous sets of (Eisenhardt & Tabrizi, 1995) but leaves open the
paces and directions of activities within firms. question of how this might change if we incor-
Such differences create challenges for firms, in- porated a multidimensional conception of envi-
cluding potential incoherence among subunits ronmental velocity. Although new product de-
and activities, fragmented internal information velopment processes may seem to be primarily
flows, and the breakdown of issue capture and linked to the product dimension of the organiza-
analysis across intraorganizational boundaries. tional environment, they cut across a wide
Furthermore, managers who understand that range of organizational functions, including re-
changes in velocity homology conditions can be search, development, design, manufacturing, le-
both endogenous and exogenous in nature will gal, marketing, and sales. Consequently, each
have not only the option of reactively entraining of these different new product development ac-
their organizations to their environment but also tivities collects, interprets, and applies relevant
the option of trying to alter the speed and direc- information from different dimensions of the or-
tion of change in specific environmental dimen- ganization’s environment. Thus, the contribution
sions to suit their organization. Firms might, for of each function to new product development is
example, lobby to influence the rate at and di- likely to be more effective when that function is
rection in which legislators develop laws and entrained with the environmental dimension for
regulations (i.e., shape what is regulated/ which it is more directly responsible. The ability
deregulated in an industry and the pace at of marketing, for instance, to effectively contrib-
which regulatory reform occurs), or undertake ute to the development of new products depends
marketing activities to influence changes in on its being entrained with the velocity of de-
demand. mand. This means that different new product
A central theme of research on environmental development functions may need to operate at
velocity has been its effect on strategic decision different speeds and in different directions in
making—those “infrequent decisions made by order to ensure process-environment entrain-
the top leaders of an organization that critically ment. Again, this can potentially create signifi-
affect organizational health and survival” cant organizational challenges in terms of coor-
(Eisenhardt & Zbaracki, 1992: 17). Following our dination and integration across the stages of the
general argument regarding the impact of ve- new product development process.
locity homology, we argue that variations in ho-
mology reward strategic decision-making activ-
Implications of Velocity Coupling
ities that are individually entrained with the
velocity of their relevant environmental dimen- We argue that the notion of velocity coupling
sion. Thus, more effective strategic decision significantly affects how we think about the sta-
making in high-homology regimes (simple and bility of velocity conditions and impacts how
integrated) will involve a set of activities with organizations coordinate changes in the pace
similar paces and directions. Such internal con- and direction of their internal activities. Previ-
sistency will provide benefits in terms of greater ous research has tended to treat environmental
efficiency and lowered task conflict (Gherardi & velocity not only as a unidimensional concept
Strati, 1988). In contrast, strategic decision mak- but as a relatively stable feature of organiza-
ing in low-homology regimes (conflicted and di- tional environments. In contrast, we argue that
vergent) will be more effective when the pace variations in velocity coupling will lead to im-
and direction of strategic decision-making ac- portant differences in the stability of the velocity
tivities are dissimilar, because they are tailored conditions of environments. For firms operating
to their relevant but distinct dimension in tightly coupled environments, a change in the
velocities. velocity of any one dimension (e.g., technology)


will have a broad impact on the velocity condi- tively planned and shifted the velocities of their
tions of the regime, through its effects on the research advocacy units to better link with the
velocities of the other dimensions to which it is activities of patient advocacy groups. These
coupled (e.g., products, demand, competition). changes helped the industry to garner the pub-
This suggests that regimes with tight velocity lic support necessary to overturn regulations
coupling (integrated and conflicted) will have (Campbell, 2009).
relatively unstable velocity conditions. This ar- Achieving this sequenced change in the pace
gument follows research on coupling in both and direction of organizational activities would
organizational environments and organizations involve the use of time-based mechanisms.
that has shown that tight coupling among ele- These include scheduling and project deadlines,
ments of a system increases the instability of information technologies that align organization-
that system (Aldrich, 1979; Dess & Beard, 1984; al activities, and resource allocation rules that
Terreberry, 1968). An important facet of this in- specify the time to be spent on decision tasks
stability is the rhythms through which it occurs. (McGrath, 1991).
The impacts of changes in the velocity of one As with velocity homology, changes in veloc-
dimension on the velocities of other dimensions ity coupling may stem from external conditions,
are unlikely to occur instantaneously but, or it may be that managers are able to increase
rather, over time, as the social and technologi- or decrease the causal connections among ve-
cal mechanisms that connect the dimensions locity dimensions in order to create strategic
are sequentially triggered and exert their advantage for their firms. One strategy to affect
impact. velocity coupling is to alter the degree of mod-
We argue that the environmental instability ularity in products (Baldwin & Clark, 1997;
and sequencing of changes associated with Sanchez & Mahoney, 1996), technologies (Yaya-
tight coupling provide an advantage to certain varam & Ahuja, 2008), organizations (Meyer &
firms over others. In particular, tightly coupled Rowan, 1977; Weick, 1976, 1982), or interorgani-
regimes (integrated and conflicted) will reward zational networks and supply chains (Afuah,
firms that employ mechanisms that sensitize 2001; Brusoni et al., 2001). Such changes can af-
them to velocity changes and allow them to rap- fect the overall coupling among environmental
idly and effectively shift the paces of their inter- dimensions, particularly if they establish new
nal operations. Typical mechanisms could in- competitive standards. Furthermore, such
clude strategic scanning systems that managers changes can be hard to attain and therefore
use to monitor and respond to changes in their difficult to imitate, thus creating a competitive
environments (Aguilar, 1967; Daft & Weick, 1984) advantage. Shimano, for example, became the
and “interactive control systems” (Simons, 1994) dominant supplier of bicycle drive train compo-
to promote external reflection and internal com- nents (shifters, chains, derailleurs, etc.) by de-
munication and action. These mechanisms are veloping high-performing, tightly coupled com-
analogous to other traditional organizational in- ponent systems that changed the nature of the
tegration (Lawrence & Lorsch, 1967) and bound- new product development and production func-
ary-spanning (Galbraith, 1973) mechanisms, but tions for their customers, as well as the nature of
with a focus on coordinating change in the pace end-user demand. Shimano’s strategy altered
and direction of organizational activities to the pace and direction of multiple velocity di-
match temporal instability in the environment. mensions for the bicycle industry and has been
Moreover, sequenced changes in velocities credited with helping Shimano gain almost 90
provide an advantage to firms that recognize percent of the drive train market for mountain
these causal connections and are consequently bicycles (Fixson & Park, 2008).
able to anticipate sequences of velocity The effects of velocity coupling on how orga-
changes. For example, increases in human ge- nizations coordinate their activities can also be
netic engineering technology in the late 1990s illustrated by considering strategic decision
led geneticists and government agencies to call making and new product development pro-
for more regulation to control the development cesses. For strategic decision making, coordina-
and application of this technology. Those firms tion is an issue of social cognition within top
that anticipated the connection between techno- management teams (Forbes & Milliken, 1999),
logical velocity and regulatory velocity proac- which we argue is significantly affected by the


“temporal orientation” of a team. A temporal with changes in their paces and directions hav-
orientation is a cognitive concept that describes ing limited impacts on each other.
how individuals and teams conceive of time—as In contrast, “recursive” new product develop-
“monochronic,” a unified phenomenon that mo- ment frameworks conceive of the process as a
tivates attention to individual events in serial system of interconnected, overlapping activities
fashion, or as “polychronic,” a heterogeneous that generate iterative and nonlinear behaviors
phenomenon that necessitates simultaneous at- over time (McCarthy et al., 2006). These include
tention to multiple events (Ancona, Okhuysen, & Kline and Rosenberg’s (1986) chain-linked model
Perlow, 2001; Bluedorn & Denhardt, 1988; Hall, and Eisenhardt and Tabrizi’s (1995) experiential
1959). We argue that strategic decision making model, both of which, we argue, are suited to
in tightly coupled regimes would benefit from a tightly coupled velocity regimes because they
polychronic orientation on the part of top man- facilitate improvisation and flexibility. These
agement teams so that team members share a capabilities help managers of the process to
view of time as malleable and unstructured. focus on and accommodate both the greater in-
This would help them to simultaneously coordi- stability and more turbulent information flows
nate strategic decision-making velocities and to associated with these velocity regimes.
pay continuous partial attention to a broad set
of issues (Stone, 2007). In contrast, in loosely CONCLUSION
coupled regimes the benefits of multitasking,
monitoring, and simultaneously adjusting to the In the paper’s introduction we suggested that
velocities of different dimensions are lower. a multidimensional conceptualization of envi-
ronmental velocity presented three important
Such situations, we argue, reward a mono-
opportunities to advance research in the area.
chronic temporal orientation that leads senior
First, we argued that it would allow a more
management teams to engage in strategic deci-
fine-grained examination of environmental ve-
sion making in a relatively independent man-
locity so as to better understand the diversity of
ner, focusing on one issue at a time.
this construct across different organizational
For new product development processes, the
contexts. In our discussions of several indus-
impact of velocity coupling rests on the ability of
tries, including fashion, tableware, computers,
firms to recognize and predict the conditions
and flat glass, we have shown that characteriz-
under which a new product will be launched.
ing these environments simply as high or low
The instability associated with tightly coupled velocity overlooks the fact that environmental
regimes (integrated and conflicted) influences velocity is composed of multiple dimensions,
the effectiveness of different process control each with a distinct velocity.
frameworks that help ensure that the right type Second, we argued that a multidimensional
of product innovation is launched at the right approach to velocity could lead to more reliable
time (McCarthy, Tsinopoulos, Allen, & Rose- and, thus, more valid empirical research by of-
Anderssen, 2006). “Linear” new product develop- fering a basis for more consistent operation-
ment frameworks conceive of the process as a alizations of velocity. Consequently, with our
series of relatively discrete, sequential stages, framework we have urged researchers to con-
with team members at each stage making deci- sider both the rate and direction of change for
sions (go forward, kill the project, put the project multiple pertinent dimensions of the organiza-
on hold, etc.) about the progress and outputs of tional environment. This reveals homology and
the process (McCarthy et al., 2006). These frame- coupling relationships among the velocity di-
works include the waterfall model (Royce, 1970) mensions, which describe the different velocity
and the stage-gate method (Cooper, 1990), which regimes we propose. These concepts provide a
assume and impose structures or “scaffolds” basis to better specify environmental velocity
that restrict the amount of iterative feedback. and use appropriate operationalizations to mea-
We argue that such linear frameworks are best sure its diversity. This, in turn, helps avoid in-
suited to new product development processes appropriate aggregations and inconsistent uses
that operate in loosely coupled velocity regimes of the velocity construct.
in which the activities within the new product Third, we suggested that a multidimensional
development process are relatively discrete, conceptualization of environmental velocity and

A MULTIDIMENSIONAL CONCEPTUALIZATION OF ENVIRONMENTAL VELOCITY

A MULTIDIMENSIONAL CONCEPTUALIZATION OF ENVIRONMENTAL VELOCITY

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A MULTIDIMENSIONAL CONCEPTUALIZATION OF ENVIRONMENTAL VELOCITY