Routines, Creativity and Rational Choice

1
Routines, Creativity and Rational Choice

• Sidney G. Winter
• The Wharton School, University of Pennsylvania,
  visiting INSEAD
• EURAM 2007
• Paris 18 May 2007

2
Outline

• Lengthy Preamble
• Reviewing John Deweys Tripartite Scheme
  of Human Nature
• Some Issues Illuminated by the Dewey Scheme
• Routines Reappraised and Reaffirmed

3
Preamble Personal background

• Trained as an economist, in the rational choice
  paradigm (of course) interests in firms
  industries.
• At the dissertation stage, became interested in
  linked issues of a) methodology, b) unorthodox
  theories of firm behavior (Carnegie School,
  e.g.)
• Taught microeconomic theory at the doctoral level
  for about 15 years. (Michigan, Yale)
• Post-tenure, and in parallel with the above
  teaching activity, pursued evolutionary economics
  in research, with increased emphasis on
  management applications after joining Wharton in
  1993.

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Preamble Historical

• Collaboration with Richard Nelson began in 1969,
  1st article Toward an Evolutionary Theory of
  Economic Capabilities appeared in 1973 (AER).
• The Nelson-Winter book, An Evolutionary Theory of
  Economic Change, appeared in 1982.
• In the book, organizational routines provide the
  dominant characterization of firm behavior in the
  short run (in lieu of rational choice).
• Today, research and controversy relating to
  routines and capabilities are at a high level.

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Preamble Methodological

• My interest is in how the world works. I.e.,
  it is in positive/descriptive science as
  distinguished from to normative/ prescriptive
  analysis.
• Claim Good theory should ideally address
  multiple levels of analysis, or at least should
  not plainly lose credibility when the level of
  analysis changes.
• As if theorizing (Friedman 1953) explicitly
  disavows the ambition just stated, hence is not
  within the scope of the present discussion.

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Preamble Recent discussion

• A major theme in recent discussion is the
  relationship to processes of change in
  particular the ways in which routines cause or
  facilitate change in organizations.
• For example, dynamic capabilities can be
  understood (in part) as routinized ways of
  effecting change.
• Unintended change is also a topic of interest
  along with the routinized processes that resist
  it.

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Fresh Guidance from a Classic SourceJohn
Deweys Psychology

• A number of researchers have recently pointed to
  helpful insights from the work of John Dewey, see
  esp. Deweys summary work Human Nature and
  Conduct (1922).
• Michael D. Cohen, Reading Dewey Reflections on
  the Study of Routine, Org. Studies 28 , 2007.
• Paul Adler and David Obstfeld, The Role of
  Affect in Projects and Exploratory Search, Ind.
  Corp. Change 11, 2007.

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What Deweys Work Offers

• Above all, a perspective that sees routinized
  (habitual) behavior as fundamental , along with
  cognition and emotion and productively
  emphasizes the linkage among these three.
• Resistance to common misunderstandings of
  routine/ habitual behavior.
• Emphasis on the key role of emotion in the
  deployment and modification of routines.

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Deweys three concepts and
their several names or relatives

• HABIT
  skill, routine, practice, s.o.p.,,
  propensity, disposition, culture (?) collective
  mind (?)
• IMPULSE
  instinct, emotion, affect, mood
• INTELLIGENCE
  cognition, deliberation, calculation,
  attention, thought

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Aside

• With an already crowded outline, I am forced to
  ignore Deweys strong emphasis on the social
  aspect of the formation of conduct, and its moral
  consequences. (At least the former will seem
  extremely congenial to contemporary social
  scientists.)
• My citations to Human Nature and Conduct are to
  the Dover paperback edition (2002).

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Sorting out the terminology at
least a little

• HABIT is the term for those sources of behavior
  that involve the accumulation of experience,
  hence all the fruits of learning and practice,
  deliberate or otherwise.
• IMPULSE refers to the evaluative response
  mechanisms that humans are born with, guiding
  native activities. In the life of an
  individual, instinctive activity comes first.
  (HNC, 89).

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Sorting, contd

• INTELLIGENCE characteristically comes into play
  when habitual action is blocked or in conflict
  with impulse. deliberation is a summary
  rehearsal (in imagination) of various competing
  lines of action. Thought runs ahead and
  foresees outcomes, and thereby avoids having to
  await the instruction of actual failure and
  disaster. (HNC, 190)

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Issue 1 Dead routine

• In Deweys terminology, the word routine is
  associated with habitual behavior that is not
  infused with emotion or intelligence and he
  rails against it. The routineers road is a
  ditch out of which he cannot get, whose sides
  enclose him, directing his course so thoroughly
  that he no longer thinks of his path or
  destination. (HNC, 172-173)

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The meaning of routine

• Deweys notion of habit, however, also embraces
  the opposite end of the spectrum, the highly
  skilled artistic performance. We are confronted
  with two kinds of habit, intelligent and
  routine. (HNC, 71)
• Nelson and Winter used routine to cover this
  full spectrum, juxtaposing organizational
  routines with individual skills, and noting the
  positive connection to innovation as well as the
  contribution to inertia.

15
Terminological perils of routine.

• Cohen (2007) suggests that the connotations of
  the term itself lead to misunderstandings, esp.
  in the direction of an image of rigidly
  repetitive behavior exactly the issue that
  engaged Dewey so intensely. Repetition is in no
  sense the essence of habit. (HNC, 42)
• Dewey might well have approved of the Zollo and
  Winter (Org. Sci 2002) analysis of the role of
  routines in learning but not the terminology!

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Routines, dead or alive.

• Consider some examples. A pianist performing
  Rachmaninoffs 3rd piano concerto with an
  orchestra. A cockpit crew and airport tower
  controller guiding a plane to a safe landing in
  dense traffic and strong crosswinds. A
  reservation agent skillfully hammering away at a
  computer keyboard to enter a new reservation
  into a balky system.

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Remarks on the examples

• Here we have examples of highly skilled
  individual actors working in established,
  structured contexts, performing roles in
  organizational routines.
• The essence the quality of the performance
  depends heavily on learning and practice, and
  coordination is of the essence in quality both at
  the individual and organizational level.
• Flexible response to contingencies is a powerful
  feature of strong performance, and affirming its
  role does not deny the critical importance of
  learning and practice.

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What terminology, then?

• If routine seems to fall short as a term for
  these very live examples, doesnt habit have
  similar shortcomings of its own, and some others
  as well?
• A difficult terminological problem is further
  complicated by the substantive point that dead
  routine is also a very real phenomenon, and its
  mechanisms tightly intertwined with those of live
  routine.

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Proposal Dead routine is the term for dead
routine. (Cohen 2007)

• The research interest is obviously not in the
  terminology. The infusions of routines with
  emotion and thought are powerful factors both in
  the execution and modification of routines, and
  need study.
• At the same time, dead routine is also an
  important feature of reality, and not so clearly
  deplorable as Dewey and others imply (more later
  on this).

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Issue 2 Affect and Creativity

• Nelson and Winter made routinized behavior the
  centerpiece of their evolutionary because of its
  manifest importance, but also because routines
  provide an essential element of the continuity or
  retention that an evolutionary approach
  requires.
• We did not deny that a lot of other things happen
  in organizations in particular, a lot of energy
  is invested in efforts to change, or resist
  change.

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Projects

• Adler and Obstfeld (2007) put forward, in the
  Dewey framework, the category of projects as a
  form of collective action in organizations.
• They see projects as an organizational
  manifestation of impulse in the Dewey scheme for
  individual conduct, the way routines express
  habit and deliberation expresses intelligence.

22
Projects vs. routines

• In contrast to routines, projects are
  time-limited activities. They are triggered not
  by familiar signals from the environment, but by
  unfamiliar ones, or by aspirations and concerns
  from outside the normal scope of evaluation.
• All of which is a good match to Deweys account
  at the individual level.

23
Affect and action

• AO seek to supply a corrective for the Carnegie
  Schools neglect of affect, or failure to
  appreciate its interactions with habit and
  intelligence. They point to the numerous ways in
  projects differ from routines and deliberation in
  their relation to affect. Persistence in the
  highly uncertain tasks that confront creative
  project teams depends on the affective dimension
  of the teams work in routine operations affect
  and emotion are far less important in determining
  persistence. (17)

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Projects and routines

• AO point out, as Dewey did, that the three
  elements of the scheme are in constant
  interaction in behavior, only the relative
  importance of each constituent is an issue.
• Thus projects have multiple relations to
  routines. They typically are partially
  routinized themselves. The act to facilitate
  learning, to modify routines and create new ones.

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Issue 3 Room for rational choice?

• Rationality of the kind expressed in economic
  theory has three distinguishable aspects or
  tests (1) process, (2) internal consistency, (3)
  outcome/ reward. Overwhelmingly, the emphasis of
  formal theory is on the second the others are
  invoked informally or ignored.
• Considered as a foundational theory of action,
  rational choice is beleaguered, to say the least.

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Rationality as a project?

• However, there is a least one way to make room
  for rational choice in the Dewey scheme.
  Sometimes organizations actually attempt to enact
  the normative guidance of rational choice theory,
  thereby producing behavior patterns that conform
  well to the theory.
• An optimal decision rule is just another routine.
  Such a routine may be deliberately created by a
  project triggered, per Dewey, by impulse

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Limitations of enacted rationality

• However, it is important to notice that such
  enacted rationality is not necessarily a winner
  in a survival contest with other forms of
  behavior. It is not necessarily grounded in an
  accurate appraisal of the environment. It is
  costly in itself. It is subject to obsolescence.
• In short, it is an entry in the usual sort of
  evolutionary struggle among organizational
  routines.

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Routines Reappraised and Reaffirmed

• This is a very rich field of inquiry, with an
  enormous range of contexts and cases. We talk
  past each other if we do not make clear what
  case/context we are talking about.
• It is a problem is to maintain some order in
  this big field, and in this connection Deweys
  scheme seems like a powerful framing device.
• (But his term habit is not so clearly
  helpful.)

29
Reappraising and reaffirming

• The evolutionary perspective on these issues is
  also a crucial element. The basic economics is
  Learning is expensive and hazardous. Smooth,
  practiced performance is desirable except when
  a change in the situation makes it undesirable.
  There is an inescapable duality between desirable
  and undesirable aspects, and constancy vs. change
  in the environmental challenge is the key to it.

30
Dewey and duality

• Although Deweys analysis repeatedly points to
  the duality, his strong preference for live
  routine over dead is at somewhat at odds with
  this analysis. He seems to call for (expensive)
  thought even when the task environment does not
  demand it. When a person passively and
  automatically understands spoken language,
  without emotional or intelligent engagement in
  the process of understanding, is that not a
  quintessential example of dead routine? Whats
  deplorable there?

31
Creativity and constraint

• One important dimension of variation is the
  degree to which individual actors have the
  autonomy to modify a routine, and if so, whether
  the organization supports its exercise.
• Many organizational situations are ones where
  local innovation by actors is highly hazardous to
  coordinated performance of the routine, and the
  organization therefore seeks to suppress it and
  deadens the routine.

32
Creativity and constraint, 2

• In these constrained contexts, the deadening of
  routine at the actor level is a real problem, but
  not one solved by denying the reality of the
  requirement for coordination.
• Projects are part of the organizational answer
  to this problem, and can unleash creativity in
  the face of unyielding requirements for tight
  constraint on operating routines. (See P.
  Adlers work passim.)

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Creativity, causality and context.

• Coordination requirements are not the only reason
  to check optimism about the capacity for
  intelligence to intervene constructively to
  modify routines. Causal understanding of
  activity is typically shallow consistent success
  depends on the context being constant in ways
  that are not recognized or understood.
• It is not surprising that attempting adaptation
  to major change is hazardous.

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Reaffirmation

• There remains a substantial range of activity
  where established routines display a great deal
  of inertia and may indeed be dead at least with
  respect to major re-organization. This is not
  accidental and not necessarily a mistake it
  may be a feature of the trade-offs presented by
  the tasks, given the ecology.
• Outside of that range, it is appropriate to focus
  primarily on the various ways that routines,
  emotion and thought contribute to change.

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Conclusion

• As noted previously, routines/ habit present a
  big piece of territory. Progress depends on the
  research community staying organized, not wasting
  too much time on mutual misunderstanding.
  Deweys framework can be employed to illuminate
  where our individual puzzle pieces fit thereby
  to help us stay organized, and to progress.