| Strategic Renewal: Four Dynamic Mechanisms for Responding to Environmental Change |
| | Baden-Fuller, Charles | City U. Business School | c.baden-fuller@city.ac.uk | 001-171-477-8652 |
| | Volberda, Henk | Erasmus U., Rotterdam | hvolberda@fac.fbk.eur.nl | 31 10 408 27 61 |
| | An organization needs specific capabilities to develop competencies, but at the same time it has to remain open for expanded search. These paradoxical requirements imply that there are balances to be struck if capabilities and resources are to remain vital. We identify four mechanisms which help describe the complex paths of evolution and adaptation of firm-level distinctive competencies to resolve the paradox of stability and renewal. These are labelled: selection, hierarchy, time and network. We show how they are embedded in the ideas of population ecology, organizational economics, administrative theory, corporate entrepreneurship, innovation theories and inter-organizational relations. By reference to previous studies, we suggest that each mechanism can be particularly associated with one of the two environmental contexts (evolution/revolution) and with specific managerial styles. |
| | Keywords: Strategic Renewal; Competencies; Organizational Change |
| An Empirical Test of Revolutionary Organizational Transformation in the Banking Industry |
| | Wischnevsky, J. Daniel | Rutgers U. | danwisch@rci.rutgers.edu | (973) 353-1065 |
| | This research investigated the factors inducing firms to undertake revolutionary organizational transformation on a sample of fifty large U.S. bank holding companies over twenty years. Revolutionary transformation consists of brief, discontinuous, and simultaneous changes in strategy, structure and power distribution accomplished over a brief period of time. Factors affecting the likelihood that a firm will engage in revolutionary transformation have been identified by punctuated equilibrium theory (Tushman & Romanelli, 1985). However, empirical research concerning the theory is still limited. In order to properly assess its theoretical contribution and introduce necessary refinements to advance our knowledge of organizational transformation processes, its validity must be assessed across different sets of conditions. This study examined whether antecedent factors to revolutionary transformation identified by the punctuated equilibrium model could be generalized to firms in the U.S. commercial banking industry, a regulated and relatively more stable industry than the minicomputer industry studied by Romanelli and Tushman (1994). We also extended the theory by incorporating the effects of organizational slack as a facilitator of organizational transformation. Organizational, industry, and macro-environmental data were collected from company reports, financial databases, industry publications, and government sources between 1975-1995. Using event history analysis, it was found that environmental shifts and organizational slack influence the likelihood that firms undertake revolutionary transformation, but CEO change and performance pressure do not. |
| | Keywords: Organizational Transformation; Strategic Change; Banking Industry |
| Differential Firm Performance in a Behavioural Model of Organizational Change |
| | Zott, Christoph | INSEAD | christoph.zott@insead.fr | 33 1 60 72 40 00 |
| | The paper explores a range of hypotheses that might explain differential intra-industry firm performance. A behavioural model is developed in which simple rules guide firms on whether to adapt internally to a changing environment and/or imitate others in order to effect organizational change. This dynamic, multi-period model, in which firms simultaneously compete, is simulated under assumptions which correspond to the hypotheses about differential firm performance.
Results reveal that organizational inertia is a plausible source of differential firm performance. Experiential learning, in and of itself, has only limited influence on heterogeneous firm performance. Interestingly, imitation may be an undesirable strategy for underperforming firms either because it is aimed at a "moving target" or because the targeted market niche is already crowded. |
| | Keywords: Heterogeneous Firm Performance; Bounded Rationality; Dynamic Capabilities |
| Relating Strategic Decision Processes to Absorbed and Unabsorbed Slack |
| | Amason, Allen C. | U. of Georgia | aamason@terry.cba.uga.edu | (706)-542-3702 |
| | Mooney, Ann C. | U. of Georgia | amooney@arches.uga.edu | (706)-542-4663 |
| | Although an important determinant of strategic decision outcomes, few studies have explored the link between organizational slack and actual strategic decision making processes. Moreover, few studies have hypothesized contradictory effects for absorbed and unabsorbed slack. We study the relationship of both absorbed and unabsorbed slack to strategic decision making in 45 top management teams. Our findings provide evidence that absorbed and unabsorbed slack differentially affect decision process characteristics like conflict, comprehensiveness, and speed. |
| | Keywords: strategic decision making; slack; TMTs |
| Punctuated and Incremental Change: The UK Water Industry |
| | Dean, Alison | City U. Business School | a.dean@city.ac.uk | +44 (0)171 477 8850 |
| | Baden-Fuller, Charles | City U. Business School | c.baden-fuller@city.ac.uk | 001-171-477-8652 |
| | Punctuated change is usually defined as a discontinuity in organisational development and is traditionally associated with environmental turbulence; it is also associated with step changes in the performance of an organisation. We discuss the foundations of the punctuated-incremental change paradox, and lay out four hypotheses regarding the moments when such change is adopted and its economic effect. We explore these ideas through a study of the UK water industry: a contrived macro experiment. Our methodology has three dimensions combining cross-sectional and longitudinal analyses of firm performance with individual case studies. This approach, enabled by the simultaneous privatisation of the major firms in the industry, allows direct comparison across firms over time. It overcomes the production of confusing results associated with the adoption of either method alone and permits a more complete picture to be developed. We find that the response to privatisation was varied and that, surprisingly, punctuated change processes were often inferior to continuous processes. This contrasts sharply with the findings of Romanelli and Tushman (1994). We explore the reasons why our results are well founded and what it means for the central debate on change management. |
| | Keywords: punctuated change,; time series/cross section,; privatisation |