Overcoming constraints to organizational change: An empirical study of firms in transitional economies.

Abstract

Firms face many challenges and constraints when undertaking change. One constraint that is not well understood is how the firm's founding environment, through organizational imprinting, limits a firm's flexibility in undertaking change at later points in time. This research addresses that gap by examining the impact of economic environment imprinting on organizational change as it occurs through knowledge acquisition and knowledge transfer routines. First, I predict that firms will favor knowledge routines reflecting their founding environment. Second, I predict that the magnitude of an external shock will affect the size of routine usage difference between firms founded in different environments. Third, I predict that all knowledge routines contribute to internal change, but that knowledge routines embedded completely within the firm are the most valuable to the firm. These predictions are tested using survey data from firms in five Central and Eastern European countries. The first set of results indicates that all knowledge routines contribute to success of change. Additionally, knowledge routines embedded within the firm are more important than knowledge routines linked to outside sources. The first set of results finds differences in knowledge routine usage due to the founding environment and size of economic shock. However, the differences are not as predicted leading me to examine other explanations. A new framework called 'adaptation and selection' is developed and tested. The results indicate that: (1) imprinting and adaptation may explain firm differences when changes in the economic environment are small; (2) as the magnitude of shock in the economic environment increases, some firms disappear through selection and others are pushed by adaptation pressures to overcome the constraints of imprinting; and (3) the breakdown of imprinting can occur under conditions of large economic shock. Through this research, we will better understand the change process in firms and their ability to adjust to shifts in their environment. This research indicates the need to consider the positive and negative impact of organizational imprinting as well as examine how imprinting can vary within a firm. These findings are relevant to firms in any environment experiencing external shifts, including countries achieving EU or NAFTA membership.