Why and How Societal Crises Give Rise to Extreme Growth Outliers: A Theory of External Enablement

We develop new theory to explain the apparent mystery that societal crises recurringly and consistently give rise to extreme growth outlier organizations that reach prominent positions in their industries and markets. We argue that societal crises increase demand for the market offerings of a minority of organizations, which can help the negatively affected majority of economic agents adapt to the crisis conditions. Because the majority of economic agents struggle, this externally-enabled minority simultaneously benefits from mutually reinforcing improvements to resource supply and institutional legitimation—advantages that are usually not bestowed on organizations that experience demand surges under non-crisis conditions. We further argue that societal crises with a broad scope, sudden onset, and extended duration provide sufficient enablement to make extreme growth possible for a select few organizations. Finally, we argue that organizations must be internally dispositioned to leverage resource expansibility, flexibility, and distributability to actualize this external enablement. Our theory about the occurrence of crisis-enabled extreme growth outliers extends emerging conversations around the important minority of organizations that benefit from crises’ overall detrimental effects. It also invites more research into the essential and systematic impact of environmental changes on economic activity to extend existing agent-based theories.