Process Theorizing: TooImportant to Ignore in a

Kaleidic WorldTODD H. CHILES

University of Missouri

Both Professors Donaldson (2002) and Watson (thisissue) highlight the important role that theoryplays in management education, but limit theirdiscussion to variance theory—one of two funda-mental types of theory in social science research(Mohr, 1982). Given that variance theory has longbeen the dominant paradigm held by scientistsand philosophers as well as the general public(Mohr, 1982), it isn’t surprising that both professorsemphasize this orientation. By doing so, however,they neglect the other fundamental type of theory:process theory. By treating “explained-variance-as-the-only-form-of-theory,” neither professor isable to address the complex dynamics of a varietyof fundamental organizational processes includ-ing adaptation, coevolution, improvisation, selec-tion, and self-organization, illustrating how a fa-vored paradigm holds powerful sway over whatwe can and cannot see (Kuhn, 1996).1

Variance theory explains the variation in a de-pendent variable as a result of the variation in anindependent variable(s) [Mohr, 1982]. More gener-ally, this approach attempts to explain a phenom-

enon using a small set of well-developed vari-ables, embedded in a nomological net, tested withstatistical techniques, and suited to predictingspecific outcomes that are unaffected by the tem-poral ordering of the independent variables(Hayek, 1967; Mohr, 1982). Alternatively, processtheory develops a causal explanation of a se-quence of events over time by telling a story abouthow and why a phenomenon evolved as a result ofthe temporal ordering and probabilistic interactionof numerous events (Mohr, 1982). Because processmodels usually address multiple levels and unitsof analysis and utilize qualitative (as well asquantitative) analysis techniques to make sense oftime-ordered data, they tend to be rich in context,high in complexity, and dynamic in character (Lan-gley, 1999).

Indeed, there is more than one form of good the-ory (DiMaggio, 1995; Ofori-Dankwa & Julian, 2001;Weick, 1995). The variance theoretic approach,rooted in mechanics and logical positivism, is ap-propriate for developing and testing falsifiabletheories about simple phenomena, but less suit-able for theorizing about path-dependent, nonlin-ear, organic processes in which myriad interac-tions give rise to complex social phenomena(Hayek, 1967; Ofori-Dankwa & Julian, 2001). Model-ing such complex phenomena calls for process the-ories situated at a higher level of abstraction andoriented toward prediction of how general patternsof change unfold. Such theories are inherently lessable to be falsified and more difficult to verify withstatistical techniques (Hayek, 1967; Ofori-Dankwa& Julian, 2001). As Nobel Laureate Friedrich Hayeknotes, “This is the price we have to pay for anadvance into the field of complex phenomena”(1967: 29). He goes on to assert: “Predictions of apattern are nevertheless both testable and valu-able. Since the theory tells us under which generalconditions a pattern of this sort will form itself, itwill enable us to create such conditions and to

1 While Donaldson explicitly features variance theoretic models(2002: 103–104) and Watson (this issue) makes them the center-piece of his response, neither considers process theory. How-ever, Donaldson reveals a strong interest in processes whendiscussing such topics as organizational adaptation over time,the rise and fall of management fads and fashions over time,decision-making processes, rivalrous processes involving tem-porary competitive advantage, and managerial action (2002:102, 104). Watson does likewise when discussing how educatorswill be called upon by students and stakeholders “to explainevents in the business world” (p. 286) such as “the actions of[corrupt Wall Street] analysts” (this issue, p. 286, emphasisadded). This disconnect between their espoused view of theory(explanation of variance) and what their discourse often re-vealed to be important (explanation of process) is noteworthyon at least two counts. First, it creates some degree of confusionby indiscriminately mixing variance and process theoreticideas (Mohr, 1982). Second, it demonstrates a natural tendencyto interpret reality using “process-theoretic machinery”—thatis, “by elaborating the flow of events, telling how somethinghappens” (Mohr, 1982: 214).

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observe whether a pattern of the kind predictedwill appear” (1967: 36).

Although a number of notable studies have em-ployed process theory in organizational decisionmaking (Cohen, March, & Olsen, 1972), strategymaking (Mintzberg & Waters, 1985), and growthstages (Greiner, 1972), among others, the use ofvariance theory has historically far outweighedprocess theory in the management literature. Morerecently, however, widespread perception thatbusinesses are increasingly buffeted by morerapid, unexpected, and incessant change has stim-ulated, as Ann Langley observes, “a surge of inter-est among organizational researchers in processtheory and dynamic phenomena” (1999: 691). None-theless, most process theories in the managementliterature suggest a simple, linear progressionthrough distinct phases leading to a precise out-come (Langley, 1999: 692) or give privileged statusto stability, routine, and equilibrium while treatingdisequilibrating change as an exceptional occur-rence rather than a natural, ongoing one (Tsoukas& Chia, 2002: 567).

To better understand many organizational phe-nomena of interest to management scholars andpractitioners such as continuous learning, newventure formation, and competitive dynamics, weneed to move beyond models with such simplisticassumptions. “Until our assumptions square withreality,” notes Donald Hambrick, “we have littlechance to influence managerial practice” (1990:251). But which way forward to better connect the-ory and practice?

One answer offered by process theorists is toembrace an even more “complex” and “radical”process theoretic approach, one that accommo-dates the nonlinear interaction of creative, pur-poseful individuals possessing limited, localknowledge who unintentionally bring about a far-from-equilibrium, system-level order as a result oflearning to continually adapt to new knowledgeobtained through recursive feedback loops (Lan-gley, 1999; Tsoukas & Chia, 2002). As many readerswill recognize, this approach describes complexitytheory—“a science of process rather than state, ofbecoming rather than being” (Gleick, 1987: 5). In animportant essay, Howard Stevenson and SusanHarmeling (1990) argue persuasively that manage-ment educators must embrace such an approach ifmanagement theory is to be useful to individualsattempting to understand and manage change in aworld characterized by creative human action,nonlinear interactions, and the absence of long-run equilibrium in society.

Proponents of complexity theory in particularand process theory in general suggest an ap-

proach to management that emphasizes the abilityto recognize general patterns of change, to createconditions for human action and experimentation,and to influence processes at certain times in somegenerally desired direction (Hayek, 1967, 1988; Lan-gley, 1999). Here managers serve as stewards ofself-organizing processes (Anderson, 1999). Alter-natively, proponents of variance theory suggest anapproach to management that stresses predeter-mined plans, centralized control, and the ability topredict specific outcomes (Hayek, 1967, 1988; Mohr,1982). In this case, managers function as engineersof specific behaviors and outcomes (Anderson,1999).

Complexity theory, in the context of KennethBoulding’s (1956) hierarchy of system complexity,affords explanation of higher level phenomenasuch as the social organization of human agents(Ofori-Dankwa & Julian, 2001). However, most ofour formal (variance) models of social organiza-tions are situated at lower levels in Boulding’shierarchy, affording explanation of static proper-ties, clockwork arrangements, and control systems(Pondy & Mitroff, 1979). Although variance theoreticmodels may be preferred by managers who wantto manipulate some aspects of the material world(Ofori-Dankwa & Julian, 2001), process models ofthe complexity theory type will be required to helpthem negotiate many aspects of the social world,especially those dealing with creative, open-ended, disequilibrating change (Lachmann, 1976).

Traditional teaching cases that illuminate or-ganizational processes in general and complexitytheoretic processes in particular are, to my knowl-edge, in short supply. Indeed, at the annual Acad-emy meeting last year, one member of a distin-guished panel of strategy process scholarslamented that Harvard-style cases failed to ad-dress strategic processes, focusing instead on con-tent issues. Fortunately, some very good materials(most of them having appeared recently) are avail-able to management educators wishing to illus-trate the concepts of complexity theory with realworld examples of organizational behavior, struc-ture, strategy, innovation, and change. For exam-ple, Richard Pascale’s (1984) classic article pro-vides an excellent case on the path-dependentprocesses, nonlinear interactions, and nonpredict-able outcomes in Honda’s entry into the U.S. mo-torcycle market. Gareth Morgan (1993) illustrates avariety of complexity theoretic concepts, includingthe creation of internal environments that supportaction, experimentation, and self-reinforcing pro-cesses, in three case vignettes in his “strategictermites” chapter. Mohanbir Sawhney and Eman-uela Prandelli’s (2000) prize-winning article in the

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California Management Review examines themanagement of innovation in turbulent environ-ments using Sun Microsystem’s Jini project as adetailed case illustration of emergent, self-organ-izing communities of creation. Thomas Hench(1999) offers a remarkably fine-grained case historyof the emergent, self-organizing processes thatunfolded at furniture maker Herman Miller, Inc.Benyamin Lichtenstein’s (2000) award-winningarticle in the Academy of Management Executiveinvestigates three cases in which entrepreneursnavigated self-organized transitions in the forma-tion of new ventures. And Eric Dent and CameronHolt (2001) explore the U.S. Air Force during war asa complex adaptive system with illustrations ofnonlinearity, holism, mutual causality, self-organi-zation, and individual interpretations as sources ofnovelty and diversity. Such materials should proveinvaluable to managers navigating complex, dy-namic organizational settings, and to manage-ment educators preparing them for the journey.

Professors Donaldson and Watsonprovide a thoughtful treatment of the roleof variance theory in managementeducation, but neglect process theory.

In conclusion, variance and process theorizingoffer very different explanations of organizationalbehavior (Mohr, 1982). They provide educators twovery different ways of training managers, and offermanagers two very different ways of making senseof the world. Both theoretical orientations mustfigure into our scholarly conversation about therole of theory in management education. Profes-sors Donaldson and Watson provide a thoughtfultreatment of the role of variance theory in manage-ment education, but neglect process theory. Byoverlooking process theory, we risk sending man-agers into the workforce ill-prepared to handle thekaleidic reality that awaits them in the new worldof business (Arthur, 1996; Lachmann, 1976).

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Arthur, W. B. 1996. Increasing returns and the new world ofbusiness. Harvard Business Review, July–August: 100–109.

Boulding, K. 1956. General systems theory: The skeleton of sci-ence. Management Science, 2: 197–208.

Cohen, M. D., March, J. G., & Olsen, J. P. 1972. A garbage canmodel of organizational choice. Administrative ScienceQuarterly, 17: 1–25.

Dent, E. B., & Holt, C. G. 2001. CAS in war, bureaucratic machinein peace: The US Air Force example. Emergence: A Journalof Complexity Issues in Organizations and Management,3(3): 90–107.

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Hench, T. J. 1999. The history of Herman Miller, Inc. and thenature of emergence: “Emergent all the way down.” Journalof Management History, 5(6): 362–379.

Kuhn, T. S. 1996. The structure of scientific revolutions (3rd ed.).Chicago, IL: University of Chicago Press.

Lachmann, L. M. 1976. From Mises to Shackle: An essay onAustrian economics and the kaleidic society. Journal ofEconomic Literature, 14: 54–62.

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Tsoukas, H., & Chia, R. 2002. On organizational becoming: Re-thinking organizational change. Organization Science, 13:567–582.

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Todd H. Chiles is an assistantprofessor of management at theUniversity of Missouri—Colum-bia. He received his PhD fromthe University of Oregon. Hisresearch interests include theemergence and evolution of or-ganizations and industries, an“Austrian school” approach toorganization, strategy and en-trepreneurship, and social andmarket institutions and pro-cesses.

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