Competition and Organizational Change

We develop a model in which competitive pressure is a catalyst for organizational
change. In our model, commitment to a narrow business strategy is valuable because
workers need to coordinate their efforts to build a strategy-specific capability. We show
that a monopolist may not be able to commit to a focused business strategy. However,
introducing competition can make commitment credible, thus leading to organizational
change and greater operating efficiency. Our model sheds light on a number of questions
in the intersection between the strategic management literature and the organizational
economics literature, including the importance of leadership styles, the existence of
X-inefficiencies, and the interactions between strategic positioning and organizational
capabilities.

http://personal.lse.ac.uk/FERREIRD/organizational%20change.pdf