Environmental Shifts and Change Strategies

We resort to a simulation study to investigate two change strategies a firm can implement when facing an environmental shift. The first strategy (termed integrate-early) consists in moving from the existing value chain to the new one by attempting to change from within existing structures. The second strategy consists in first setting an autonomous value chain and second, merging that autonomous value chain with existing assets to be leveraged. We characterize the environmental shift in terms of the distribution of the integration of old and new assets. Overall, we find that if the integration efforts are distributed throughout the value chain, then it is best to resort to the integrate-early strategy. On the contrary, when integration is localized, then the separate-early strategy dominates.