Organizational changes in emerging economies: drivers and consequences
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Organizational changes in emerging economies: drivers and consequences Kevin Zheng Zhou1, David K Tse1 and Julie Juan Li2 1
School of Business, The University of Hong Kong, Pokfulam, Hong Kong; 2Department of Marketing, City University of Hong Kong, Hong Kong Correspondence: KZ Zhou, School of Business, The University of Hong Kong, 7th Floor, Meng Wah Complex, Pokfulam, Hong Kong. Tel: þ 852 2859 1011; Fax: þ 852 2858 5614; E-mail: [email protected]
Abstract Organizational change in emerging economies, although difficult, is inevitable. The authors study the drivers and consequences of organizational changes in an emerging economy, China. The results of a firm-level survey show that organizational changes in technical vs administrative areas are differentially driven by firms’ motivation to change (past performance), opportunity to change (firm location and market orientation), and capability to change (firm ownership, managers’ change attitude, and leader charisma). Furthermore, technical and administrative changes affect firm performance through distinct paths. Technical changes have a direct, positive impact on performance, whereas administrative changes enhance firm performance indirectly through technical changes, and the effect of administrative changes on performance is strengthened by the presence of a participative culture. Journal of International Business Studies (2006) 37, 248–263. doi:10.1057/palgrave.jibs.8400186 Keywords: organizational change; administrative change; technical change; emerging economy
Received: 2 February 2004 Revised: 8 May 2005 Accepted: 29 June 2005 Online publication date: 23 February 2006
Introduction To maximize their operational efficiency, organizations often develop and govern their work routines through accepted rules and systems (D’Aunno et al., 2000). Organizational change disrupts these repetitive work routines by introducing new rules and systems into the operation. Therefore, as structural inertia theorists such as Hannan and Freeman (1984) propose, organizational change is very difficult because the institutionalized routine activities create strong internal resistance to change. Granovetter (1985) similarly suggests that organizational change is difficult because organizations are deeply embedded in the institutional and technical structures of their environment. Amburgey et al. (1993) further indicate that organizations strongly resist change in most cases (see also Greenwood and Hinings, 1996; Greve, 1998; Miller and Chen, 1994). Today’s business environment, however, is increasingly uncertain and risky. Hence, knowing how to adapt and change successfully has become a critical and timeless challenge for any organization (Brown and Eisenhardt, 1997; Feldman, 2004; Pettigrew et al., 2001; Piderit, 2000). This challenge is even more intense in emerging economies, which are undergoing unprecedented transitions in their social, legal, and economic institutions that rais
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