A central debate in organizational theory concerns how organizations evolve. There are two diametrically opposing viewpoints. Adaptation theories predict that change occurs as fluid organizations adjust to meet shifting environmental demands, while selection theories predict that change occurs through the differential selection and replacement of inert organizations as environmental demands vary over time. Our paper bridges these polar opposites by using a punctuated equilibrium framework to examine organizations' responses to discontinuous industrylevel change. This framework recognizes that the histories of many industries are occasionally punctuated by dramatic exogenous shocks, such as radical technological innovation, social and political turmoil, major changes in government regulation, and economic crashes. Our central thesis is that such environmental punctuations dramatically reduce pressures and rewards for organizational inertia and thereby alter both organizations' propensities for change and their survival chances following change.We focus on one form of punctuation, major regulatory change, and study firms in two industries: general hospitals and savings and loan associations. For organizations in both industries, we examine three important outcomes: shifts in organizational domain, CEO succession, and changes in financial performance. Our analyses show that punctuational regulatory change prompts shifts in organizational domains and executive leadership. Additionally, post-punctuation domain change and post-punctuation CEO succession both affect subsequent performance. We discuss our results in light of current thinking about the content and process effects of core organizational change, which has been developed in the context of stable environments. Finally, we argue for the development of more temporally sensitive theories of organizational action. (Organizational Evolution; Punctuated Equilibrium; Deregulation; Organizational Change; Organizational Inertia; Organizational Performance; CEO Succession) Change in the core attributes of organizations is difficult and fraught with peril. Organizational ecologists have proposed that when organizations change, resources are diverted from operating to reorganizing, which reduces efficiency and survival chances (Hannan andFreeman 1984, 1989;Amburgey et al. 1993; Barnett and Carroll 1995). These process effects of core change-the costs associated with redirecting resources from operations to reorganization, learning new routines, and building new relations with exchange partners-are expected to be negative. In contrast, the content effects of core change-the impact of adjusting to fit environmental demands-may be positive or negative, depending on the luck and skill of organizational decision makers and implementers. Considering process and content effects together, core organizational change is likely to impair performance and may even lead to failure.Despite the inherent riskiness of core organizational change, it is sometimes necessary and...