Organizational Governance Adaptation: Who Is In, Who Is Out, and Who Gets What

Abstract

Governance gives life to an organization by establishing the rules that shape organizational action. Structures of governance rest on stakeholder engagement, particularly on how stakeholders assess the prospects for earning a return by committing their specialized resources to the organization. Once formalized, governance structures and processes can resist change. Yet, under special circumstances, some stakeholders that are a party to an organization may seek to adapt governance in response to changes in the external environment that surrounds the organization. Adaptation often requires renegotiation: who has claims on the organization and who gets what? In this article we analyze the relationship between the institutional change that drives adaptation and the outcome of renegotiation. We draw on institutional economics and organization theory to identify four pathways of governance adaptation: continuity, architectural change, enfranchisement change, and redistribution. We call for further theoretical and empirical research on governance adaptation and its implications for organizational value creation and capture.