First Monday

When Internet Companies Morph: Understanding Organizational Strategy Changes in the 'New' New Economy by Robert J. Kauffman, Tim Miller, and Bin Wang


The rapid ascent of the Internet economy funneled almost $US90 billion of venture capital money into Internet startups over a period of four years that roughly ended in mid-2000. An equally rapid bust in the cycle that year abruptly shut off funding and thrust remaining Internet companies into an unprecedented frenzy of adaptive strategic and organizational re-focusing behavior. In this article, we relate the findings of our study of this period of hyper-evolution and give a snapshot of the publicly reported "morphing" activities of 125 Internet companies, based on which we propose a profitability-driven typology of Internet firm repositioning behavior. The study provides academic researchers with an overview of industry strategic mutation patterns and provides executives with a process analysis for identifying and evaluating their own strategies in a way that is essential for success in the highly volatile Internet economy. We also offer our predictions on these strategies' efficacy in light of the current emphasis on business profitability and return on investment (ROI).