Organizational learning theory

Acronym
OL

Alternate name(s)
none

Main dependent construct(s)/factor(s)
Organizational Effectiveness – the degree to which expected outcomes, given environmental conditions, match actual outcomes. The degree to which they do not match is referred to as Performance Gap, which can also serve as a dependent construct.

Main independent construct(s)/factor(s)
1.	Levels of learning (individual versus organizational) 2.	Types of learning processes (cognitive, experiential, vicarious, deductive, grafting, scanning) 3.	Type of learning (Action-Outcome linkages, probability of outcome, level of uncertainty associated with probability of outcome) 4.	Complexity of environment 5.	Degree of organizational change (high versus low – also see Double loop learning vs. Single loop learning) 6.	Dynamism of environment (rapid change versus slow change) 7.	Stress (functional, dysfunctional, etc) 8.	Strategic design/emphasis of organization (e.g. Miles and Snow’s Prospector/Analyzer/Defender/Reactor typology) 9.	Development stage of organization (early-stage vs. mature) 10.	Structure of organization (centralized vs. decentralized) 11.	Socio-cultural environment of organization (endogenous factors including technology, administrative processes, and “frames of reference”) 12.	External environment (competitors, diffusion of learning, etc.)

Concise description of theory
Organizational learning theory states that, in order to be competitive in a changing environment, organizations must change their goals and actions to reach those goals. In order for learning to occur, however, the firm must make a conscious decision to change actions in response to a change in circumstances, must consciously link action to outcome, and must remember the outcome. Organizational learning has many similarities to psychology and cognitive research because the initial learning takes place at the individual level: however, it does not become organizational learning until the information is shared, stored in organizational memory in such a way that it may be transmitted and accessed, and used for organizational goals.

The first part of the learning process involves data acquisition. A firm acquires a “memory” of valid action-outcome links, the environmental conditions under which they are valid, the probabilities of the outcomes, and the uncertainty around that probability. The links are continually updated overtime, either through additions, rejections based on new evidence, or strengthening/expanding the links from confirmatory evidence. There are many ways to acquire these links, including experiential, experimental, benchmarking, grafting, and so forth, but they must be a conscious effort to discover, confirm, or utilize a cause and effect, or they are simply blind actions relying on chance for success. A critical point is that firm actions will – and must – change in response to changes in the environment, as each action-outcome link must be specified in terms of applicable conditions. Successful firms, then, scan their environment for signs of change, real or anticipated, to determine when change is necessary: this, of course, presupposes that they (a) have learned which are the important indicators to scan and (b) have learned what degree of change in environmental indicator does or does not require change in actions.

The second part of the process is interpretation. Organizations continually compare actual to expected results to update or add to their “memory”. Unexpected results must be assessed for causation, actions adapted or new action-outcome links specified if necessary, and learning increased. This stage does not imply that any action is taken. This is also one of the major debates in this theory: some theorists insist that action is not necessary for learning to have taken place (all that is required is for expansion of the knowledge base or change in understanding) while others insist that unless actions change, there is no learning.

Consequently, the third stage is adaptation/action. This is when the firm takes the interpreted knowledge and uses it to select new action-outcome links appropriate to the new environmental conditions. The main point here is that this is a process of continual adaptation to environmental conditions (internal, external, competitors, state of technology, etc) and will be affected to a large extent by the complexity and dynamism the firm experiences. Once adaptation has occurred, the firm’s knowledge base is updated to include the new action-outcome link, probabilities, uncertainty, and applicable conditions and the process continues. This feedback is a continual and iterative process, and occurs at all stages of the process.

Diagram/schematic of theory
A somewhat simplified model, based on the majority consensus is given below. Some authors break this into four components. Some argue that learning may occur at the level of interpretation without requiring action, other vehemently argue that without action being taken, learning has not actually occurred.

Originating author(s)
The germs of the concept can be found in Weick (1979) The Social Psychology of Organizing and Cyert and March (1963) A Behavioral Theory of the Firm. Cangelosi and Dill (1964), Duncan and Weiss (1979), Argyris (1976, 1977, 1979a, 1979b), Daft and Weick (1984), and Levitt and March (1988) have all expanded, clarified, or contributed to the theory.

Seminal articles
Argyris, C. 1967. "Today's Problems with Tomorrow's Organization," Journal of Management Studies (4:1), pp. 31-55.

———. 1976. "Single-Loop and Double-Loop Models in Research on Decision Making," Administrative Science Quarterly (21:3), Sep., pp. 363-375.

_____. 1977. "Double Loop Learning in Organizations," Harvard Business Review (55:5), Sep, pp. 115-125.

Cangelosi, V. E., and W. R. Dill. 1965. "Organizational Learning: Observations Toward a Theory," Administrative Science Quarterly (10:2), Sep., pp. 175-203.

Daft, R. L., and K. E. Weick. 1984. "Toward a Model of Organizations as Interpretation Systems," The Academy of Management Review (9:2), Apr., pp. 284-295.

Duncan, R., and Weiss, A. 1979. “Organizational Learning:  Implications for Organizational Design,”  Research in Organizational Behavior (1), pp. 75-123.

Fiol, C. M., and M. A. Lyles. 1985. "Organizational Learning," The Academy of Management Review (10:4), Oct., pp. 803-813.

Huber, G. P. 1991. "Organizational Learning: The Contributing Processes and the Literatures," Organization Science (2:1, Special Issue: Organizational Learning: Papers in Honor of (and by) James G. March), pp. 88-115.

Levitt, B., and J. G. March. 1988. "Organizational Learning," Annual Review of Sociology (14), pp. 319-340.

Originating area
Organizational theory; Sociology

Level of analysis
There is considerable debate within the literature on this point. Learning takes place at the unit/individual level, but until it is encapsulated at the organizational level (which is more than simply the sum of the units’ learning), information remains private and “unknowable”. Levels of analysis may cover one of five levels: unit, group, company, industry, or society. The usual levels of analysis, however, are either individual or organization.

IS articles that use the theory
Argyris, C. 1977. "Organizational Learning and Management Information Systems," Accounting, Organizations and Society (2:2), pp. 113-123.

Cha, H. S., Pingry, D. E., and Thatcher, M. E.. (2008). “Managing the Knowledge Supply Chain: An Organizational Learning Model of Information Technology Offshore Outsourcing,”  MIS Quarterly (32:2), June, pp. 281-306.

Hahn, E. D., Doh, J. P., and Bunyaratavej, K. (2009). “The Evolution of Risk in Information Systems Offshoring: The Impact of Home Country Risk, Firm Learning, and competitive Dynamics,” MIS Quarterly (33:3), Sept., pp. 597-616.

Hult, G., and Tomas, M. (1998). “Managing the international strategic sourcing process as a market-driven organizational learning process,” Decision Sciences (29:1), Winter, pp. 193-216.

____, ____, Hurly, R. F., Giunipero, L. C., and Nichols Jr., E. L. (2000). “Organizational Learning in Global Purchasing: A Model and Test of Internal Users and Corporate Buyers,”  Decision Sciences (31:2), Spring, pp. 293-325.

Janz, B. D. and Prasarnphanich, P. (2003). “Understanding the Antecedents of Effective Knowledge Management: The Importance of a Knowledge-Centered Culture,” Decision Sciences (34:2), Spring, pp. 351-385.

Salaway, G. 1987. “An Organizational learning Approach to Information Systems Development,” MIS Quarterly (11:2), June, pp. 245-265.

Links from this theory to other theories
Absorptive capacity theory, Contingency theory, Strategic Theory, Knowledge Management, Cognition and Learning; Knowledge Acquisition/Creation

Original Contributor(s)
Kimberly Zahller, University of Central Florida Please feel free to make modifications to this site. In order to do so, you must register. Return to Theories Used in IS Research