Switching Costs in Turbulent Task Environments

Altering the status quo in favor of a new solution may induce particular extra costs. In organizations such switching costs are assumed to prevent decision-makers from implementing new solutions and, hence, to cause inertia. Particularly when organizations operate in a turbulent environment which requires determined adaptive behavior, switching costs are suspected to unfold detrimental effects on the Performance of an organization. This paper studies the effects of switching costs for different levels of turbulence in the task environment and controls for the complexity of interactions within an organization. For this, an agent-based simulation based on NK fitness landscapes is employed. The results indicate that the effects of switching costs subtly vary with the complexity and the turbulence of the task environment. Moreover, contrary to the prevailing view, the study leads to the conjecture that switching costs may increase efficiency of adaptive processes particularly in turbulent and complex task environments.