The Deep Historical Roots of Organization and Strategy: Traumatic Shocks, Culture, and Institutions

We argue that organizations have deep roots in traumatic societal shocks that long preceded their founding. Drawing from the strategic management and social science literatures, we explain how traumatic shocks, such as conflict, disease, and natural disaster, can alter the institutional and cultural paths that determine future business environments. Historical shocks can help clarify the origin of cultural and institutional differences and help provide causal inference about why these differences are correlated with organizational structure and strategy. We explain specific cultural and institutional mechanisms through which historical traumatic shocks persist as well as specific organizational factors influenced by these mechanisms. We also provide guidance on key approaches for empirically linking traumatic shocks with modern firms as well as common identification problems in these methods. Our approach clarifies a path for clarifying theory on how culture and institutions shape firms and how management scholars might anticipate the evolution of market development following emerging traumatic shocks.