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Organizations face a key challenge in dynamic environments: the contexts in which experience is gained will not always match the contexts in which experience will be applied. This challenge has been investigated largely in terms of progressive environmental change, which increasingly invalidates learning from prior experience. A great deal of environmental dynamism, however, involves cycling through a limited set of environmental conditions that appear and then give way to other conditions, only to later reappear. We argue that cycles create some of the same problems for organizations as progressive change but also provide organizations an opportunity to reapply lessons as the cycle moves from phase to phase. We develop hypotheses about how cycles affect what organizations learn and how cyclical conditions affect how organizations learn. We test the resulting hypotheses in the highly cyclical context of construction lending by community banks using a panel of nearly 40 years of local real estate cycles. The online appendices are available at https://doi.org/10.1287/orsc.2018.1239 .

AbstractSystem dynamics research has made numerous contributions to a range of management subfields, including operations, organization behavior, marketing, behavioral decision making, and strategy. In this paper, we focus on the role for system dynamics research in making important progress on the defining issue in the field of strategy: why are some firms more profitable than others? Strategy researchers are eager for dynamic theories that explain the evolution of performance differences among firms and are increasingly looking to managerial decision making as the source of dynamics. This interest in dynamics and decision making creates an enormous opportunity for system dynamics researchers as carefully grounded behavioral theories of dynamics flow naturally from the research methods of system dynamics. Building and testing theories that explain longitudinal patterns of performance differences among firms would be an enormous step forward where mainstream strategy approaches have struggled. We identify four promising research paths along these lines for system dynamics research in the field of strategy. Copyright © 2009 John Wiley & Sons, Ltd.