Capability Traps and Self-Confirming Attribution Errors in the Dynamics of Process Improvement

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Abstract
To better understand the factors that support or inhibit internally focused change, we conducted an inductive study of one firm's attempt to improve two of its core business processes. Our data suggest that the critical determinants of success in efforts to learn and improve are the interactions between managers' attributions about the cause of poor organizational performance and the physical structure of the workplace, particularly delays between investing in improvement and recognizing the rewards. Building on this observation, we propose a dynamic model capturing the mutual evolution of those attributions, managers' and workers' actions, and the production technology. We use the model to show how managers' beliefs about those who work for them, workers' beliefs about those who manage them, and the physical structure of the environment can coevolve to yield an organization characterized by conflict, mistrust, and control structures that prevent useful change of any type.