DISCONTINUOUS THREATS AND OPPORTUNITIES: HOW MANAGERS’ COGNITION AND
EXPERIENCE OF THEIR INSTITUTIONAL ENVIRONMENT INFLUENCES ORGANIZATIONAL
INERTIA
Paul Steffens1
Fiona Lettice2
Peter Thomond3
1Australian
Centre for Entrepreneurship Research, QUT Business School, Queensland
University of Technology, Brisbane, Australia
2
Norwich Business School, University of East Anglia, Norwich, Norfolk, United Kingdom
3
Clever Together LLP, 5A Maltings Place, 169 Tower Bridge Road, London, United Kingdom
DRAFT
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DISCONTINUOUS THREATS AND OPPORTUNITIES: HOW MANAGERS’ COGNITION AND
EXPERIENCE OF THEIR INSTITUTIONAL ENVIRONMENT INFLUENCES ORGANIZATIONAL
INERTIA
ABSTRACT
Incumbent organizations often face organizational inertia, both “resource rigidities” and
“routine rigidities”, when they attempt to deal with the challenge of discontinuous change in
their environment. We elaborate earlier research that emphasizes the important role of
managerial cognition, in particular perceptions of threats and opportunities, in shaping
organizational response to discontinuities. Using field data from 51 case studies we discover
that the way managers experience their institutional environment also plays a critical role.
Somewhat unsurprisingly, when managers experienced a “highly institutionalized” (opaque)
organizational field, perceptions of both threats and opportunities were suppressed, leading to
organizational inertia. Yet we unexpectedly find that organizations also struggle to overcome
inertia in “highly open” (hazy) non-institutionalized environments that are too disordered to
illuminate unambiguous threats and opportunities. We develop an interpretive model linking
managerial experience of their institutional environment, managerial cognition (perceptions of
threats and opportunities) and organizational inertia (resource and routine rigidities).
Key words: Discontinuous Innovation; Organizational Inertia; Managerial Cognition;
Institutional Theory
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Incumbent firms often fail to effectively adapt to discontinuous innovations that re-shape the
existing terms of economic exchange within established markets (Christensen and Bower, 1996;
Tushman and Anderson, 1986; Gilbert, 2005). At an organizational level, firms tend to be
constrained by forms of organizational inertia that limit their capacity to make the required
non-linear internal adjustments in response to significant external change (Henderson and
Clark, 1990; Miller and Friesen, 1980; Tushman and Romanelli, 1985). Interestingly, research
reveals that organizations may fail to respond even when managers recognize the need for
change (Johnson, 1988; Tripsas and Gavetti, 2000; Tushman and O’Reilly, 1996). Gilbert (2005)
identified two distinct types of organizational inertia that tend to act independently from each
other. First, resource rigidities, or the failure to change resource investment patterns, stem
from two mechanisms. A firm’s dependencies on external resource providers (Pfeffer and
Salancik, 1978) including existing customers and suppliers (Christensen and Bower, 1996) and
funders (Noda and Bower, 1996) influence resources to be allocated towards existing markets
rather than emerging markets. Second, economic arguments suggest incumbent firms are
incentivized to invest in markets where they have a strong position rather than investing in
discontinuous change (Arrow, 1962; Gilbert and Newberry, 1982). Routine rigidities refer to the
failure to change the organizational processes or routines (Nelson and Winter, 1982) that use
the allocated resources. Organizational routines tend to be aligned with the environment and
incrementally adapt in a self-reinforcing and path-dependent manner, but are not capable of
adapting to discontinuous change (Miller and Friesen, 1980; Siggelkow, 2001; Teece, Pisano and
Shuen, 1997; Tushman and Anderson, 1996). Further, successful exploitation, particularly in
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multilevel organizations, results in competency traps that inhibit the exploration required to
respond to new possibilities (Leonard-Barton, 1992; Benner and Tushman, 2003; Burgelman,
2002; Levitt and March, 1988; March, 1991).
Scholars have identified managerial cognition, and in particular attention to and
interpretation of changes in the external environment, as one of the critical factors in shaping
organizational response to technological change (Barr, 1998; Barr, Stimpert & Huff, 1992; Garud
and Rappa, 1994; Tripsas and Gavetti, 2000; Gilbert, 2005; Kaplan, 2008). Importantly,
managerial perception of threat appears to be a critical determinant of organizational
response. Yet scholars are divided whether threat perceptions promote or inhibit
organizational inertia. One line of research contends that perception of threat increases the
likelihood and degree of organizational response by motivating managers of the imperative to
act (Chen and McMillan, 1992; Cyert and March, 1991; Huff, Huff and Thomas, 1992; Lant,
Milliken and Batra, 1992; Marcel, Barr and Duhaime, 2010; Thomas, Clark and Gioia, 1993; Barr
and Huff, 1997;). However other scholars argue that perceived threat intensifies inertia by both
restricting attention away from alternative courses of action and encouraging managers to rely
on existing routines (Dutton and Jackson, 1987; Ross and Staw, 1993; Staw, Sandelands and
Dutton, 1981). Gilbert (2005) attempted to reconcile these apparently contradictory findings.
His study of the response of four newspaper companies to the digital revolution suggested that
a high level of perceived threat acts to lower resource rigidities, but reinforces routine rigidities.
Gilbert (2005) proposed that while threat perceptions act to overcome resource rigidities,
‘opportunity framing’ (refs) assists organizations to relax routine rigidities. These critical insights
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are based on a single case exception in Gilbert’s work, and have not been explicitly examined in
other empirical investigations. Our study initially set out to explore the boundary conditions
and to further elaborate the links between managerial perceptions of threat and opportunity
and resource and routine rigidities as proposed by Gilbert (2005). We conducted a wider
empirical investigation of the phenomena. We collected field data from a wide range of
empirical contexts in which firms experienced discontinuous threat or opportunities. We found
that the firms in our sample which exhibited the strongest inertia (both resource and routine
rigidities) fell into two distinct groups. The managers in one set of firms perceived their industry
as a very closed and structured environment and believed in the status quo. In stark contrast,
the managers in the other set of firms perceived a chaotic, uncertain external environment and
struggled to establish concrete courses of action. The way in which managers experienced their
organizational environment appeared to be critical.
This initial observation lead us to turn to neo-institutional theory as a lens for
understanding the way in which managers’ experiences of their organizational environment
might shape their cognitive framing of discontinuous change. Institutional pressures have been
widely offered as explanations of organizational conduct whereby practices and structures are
often reflections of rules, beliefs, and conventions emanating from the wider environment
(Meyer and Rohan, 1977; DiMaggio and Powell, 1983; Scott, 2001; Zucker 1977). Institutional
scholars emphasize that “institutionalization is fundamentally a cognitive process” (Zucker,
1983: p25) that is embodied as shared cognition in the form of “taken-for-granted scripts, rules
and classifications” (DiMaggio and Powell, 1991: p.15). As such, institutional pressures generally
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act to reinforce the status quo and resist change (Dimaggio and Powell, 1983; Zucker, 1977).
Discontinuous innovations are by their very nature incompatible with existing institutional
frameworks, violating institutional expectations with regard to product, technology and market
developments (Christensen, 1997; van Dijk et al., 2011). Hence, we can generally expect
organizations in ‘highly institutional’ environments to resist discontinuous change.
Although institutional pressures act to resist change, one stream of institutional research
has been concerned with understanding institutional change. Most institution change research
has tended to take an agency stance, focusing on the strategies used to gain legitimacy,
manipulate structures and mobilize the resources required to overcome institutional barriers
and enact change at an institutional level (e.g. Dorado, 2005; Greenwood and Suddaby, 2006;
Seo and Creed, 2002; Tracey, Phillips and Jarvis, 2011; van Dijk et al., 2011). Of particular
relevance is the work of Dorado (2005) who explored the impact on the degree of
institutionalization in an organizational field on the ability of “institutional entrepreneurs” to
enact change. Dorado proposed that opportunities for change will be perceived as opaque in
highly institutionalized fields, where actors will not be able to identify options to introduce new
combinations. However, she also proposed that in very non-institutionalized fields,
opportunities for institutional change would be perceived as hazy, where “opportunities are
likely to be out of grasp for agents hard pressed to make sense (Weick 1995) and/or bring order
(Swidler 1986) to a problematic environment” (Dorado, 2005: 394). While Dorado’s focus was
on actors intending to affect institutional change, we extend her line of reasoning to explore
organizational response to the potential of discontinuous change. That is, we investigate the
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way in which managerial cognition of opportunities (and threats) at an organizational level are
shaped by how managers experience their institutional environment.
Our study contributes to theories of organizational inertia and studies of discontinuous
change. We use field data from 51 episodic case studies that capture organizational response
to threats and opportunities presented by discontinuous change. A key insight is that the way in
which managers experience their institutional environment is fundamental in shaping their
cognition of both threats and opportunities as a consequence of discontinuous change, and
that this in turn is a critical determinant of organizational inertia (both resource and routine
rigidities). As such, we extend existing theories of organizational inertia by linking managerial
cognition of threats and opportunities to the way in which managers experience their
institutional environment. In line with the prevailing view of institutional theory (e.g. DiMaggio
and Powell, 1983; Scott, 2001), our results show that organizations whose managers experience
a highly institutionalized field exhibit a high degree of rigidity to change. We also found that
managers in organizations who experience a very low level of institutionalization exhibit a high
degree of rigidity to change as well, but for different reasons. In these cases, organizations
failed to respond as managers struggled with sense-making (Weick, 1995) and an inability to
perceive threats and opportunities. It was in a mid-range level of institutionalization that
organizations tended to overcome inertia. Our findings also provide support for Gilbert’s (2005)
proposal that perceptions of threats tend to reduce resource rigidities, while opportunity
framing is paramount to relaxing routine rigidities. However we extend the boundary
conditions of his work by illustrating that for organizations which experience very low levels of
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institutionalization, the mechanisms by which resource and routine rigidities are formed are
quite different to the highly institutionalized newspaper industry that he studied.
THEORETICAL BACKGROUND
Managerial Cognition and Organizational Inertia
Prior research offers insights into how managerial cognition and interpretation of changes in
the external environment shape organization response to technological change (Barr, 1998;
Barr, Stimpert & Huff, 1992; Garud and Rappa, 1994; Tripsas and Gavetti, 2000; Gilbert, 2005;
Kaplan, 2008). This research builds on a research tradition that emphasizes the importance of
managerial cognition in guiding strategic decisions (c.f. Porac, Thomas, & Baden‐Fuller, 1989;
Huff 1990; see review by Kaplan, 2012). Since managerial capacity for information processing is
limited (March and Simon, 1958; Simon 1947), interpretation and sense-making are important
when faced with complex and ambiguous environments (e.g. Keiser and Sproull, 1982;
Bartunek, 1984; Daft and Weick, 1984; Weick, 1995; Gioia and Thomas, 1996).
Huff, Huff and
Thomas, 1992; Lant, Milliken and Batra, 1992).
For managerial cognition to influence organizational response to discontinuous change, a
first condition is that the discontinuity receives managerial attention. The attention-based view
contends that, within a complex environment, it is the issues decision-makers pay attention to
which drive important decisions (Ocasio, 1997; Hoffman and Ocasio, 2001). Kaplan (2008), in
her study of the response amongst communications technology firms to the fiber-optic
revolution, finds that CEO attention is an important determinant of strategic action.
Importantly, scholars have identified managerial perceptions of threat as critical for explaining
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organizational inertia (Gilbert, 2005; Jackson and Dutton, 1988; Staw, Sandelands and Dutton,
1981). Hence a second cognitive element that is germane to our investigation is the negative
(e.g. threat) vs positive (e.g. opportunity) framing of issues or events (Dutton, Fahey and
Narayanan (1983); Dutton and Jackson, 1987; Thomas and McDaniel, 1990). Yet while some
investigations into organizational inertia reveal that the perception of a discontinuous threat
can motivate change (e.g., Barr and Huff, 1997; Huff, Huff and Thomas, 1992; Lant, Milliken and
Batra, 1992), others claim that the perception of a discontinuous threat will lock managers into
focusing on previously learned routines (e.g., Dutton and Jackson, 1987; Hartman and Nelson,
1996; Staw, Sandelands and Dutton, 1981).
Gilbert (2005) attempted to reconcile these contradictory findings by distinguishing two
forms of inertia. In his study of eight mature newspaper organizations that were facing a threat
from digital online media, Gilbert (2005) shows that the threat of discontinuous innovation was
seen as a catalyst to overcome resource constraints and invest in online publishing, thereby
overcoming resource rigidities. However, the same threat was a driver of organizational inertia,
exemplified by more centralized control and decision making, reduced experimentation, the
reinforcement of existing routines and a focus on existing resources. Hence perception of
threat accentuated routine rigidities.
Gilbert (2005) proposed that opportunity framing might enable incumbent firms to
overcome the routine rigidities they experienced when facing discontinuous change. Using
observations from the one media organization that overcame organizational inertia, he
proposed that structural differentiation allowed a positive framing of the discontinuous
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opportunity by managers within a new venture division. This is consistent with earlier work that
has identified structural autonomy as a mechanism to overcome organizational inertia
(Christensen, 1997; Tushman and Anderson, 1986; Tushman and O’Reilly, 1996). Yet our
knowledge of the relationship between managerial cognition of perceptions of both
discontinuous opportunities and threats and the impact on organizational resource and routine
rigidities remain incomplete. The initial purpose of this study is to elaborate our understanding
of these links.
Organizational Field Transparency and Institutional Change
An institutional perspective is most commonly used to explain the isomorphism or similarity
and stability of organizational arrangements (DiMaggio and Powell, 1983; Zucker, 1977). As
such, highly institutionalized environments tend to strongly resist change. However,
institutional theory also provides a recognized platform from which to account for institutional
and organizational change (Dougherty, 1994; Ehrenfeld; 2002; Greenwood and Hinings, 1996;
Lawrence, Winn and Jennings, 2001; Meyer, 1982; Oliver, 1991). Importantly for our study,
institutional pressures are thought to operate primarily through social mechanisms that shape
cognition, whereby actors develop a shared institutional logic that encompasses taken-forgranted assumptions of what constitutes legitimate goals and how they may be pursued (Scott,
1994; Dobbin, 1994; Thornton and Ocasio, 1999). Hence institutional forces are embodied as
shared cognition of acceptable practices, rules and classifications (Zucker, 1983; DiMaggio and
Powell, 1991).
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A primary unit of analysis in institutional research is the organizational field, a unit which
comprises of the enterprises and actors that, in general, constitute the recognized area of
institutional life (DiMaggio and Powell, 1983). Organizational fields can therefore be described
in terms of webs of “…values, norms, rules, beliefs, and taken for granted assumptions, that are
at least partially of [the actors] own making” (Barley and Tolbert, 1997, p93). An emerging
institutionalized organizational field will simultaneously enable and constrain the activities of
the managers involved, limiting the opportunities and threats that they perceive and to which
they respond. Hence, organizational fields and the processes of institutionalization are
important to the topic of technology management and innovation as they increase the
probability of certain types of behavior, to a greater or lesser degree, by setting bounds on
rationality and restricting the opportunities and alternatives that actors see (van Dijk, Berends,
Jelinek, Romme and Weggeman, 2011).
Organizational fields can be conceptualized as having a varying degree of constituent
multiplicity (Oliver, 1991). The degree of multiplicity experienced by managers refers to the
extent to which managers are tightly coupled to their organizational field and insulated from
the routines, customs, ideas and resources of other fields (Greenwood and Hinings 1996; Seo
and Creed, 2002; Whittington 1992). Managers who experience a high degree of multiplicity
will be exposed to a large number of institutional referents, some of which will overlap and
compliment and others that will conflict. ’Conflicting pressures preclude organizational
conformity to the institutional environment in its entirety…’ (Oliver, 1991:163), in fact, ’social
forces do not so much smother managerial agency as enable it.’ (Whittington, 1992:707).
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Hence, institutional scholars also demonstrate that in fields where managers are open to the
tension between conflicting institutional structures, change can be mustered and new
arrangements developed by actively exploiting divergence (Giddens 1991; Seo and Creed, 2002;
Whittington, 1992).
Dorado (2005) utilizes the constructs of institutionalization and multiplicity to theorize that
a manager’s ability to perceive opportunities and their capacity to mobilize resources to exploit
them is dependent upon organizational field transparency. She demonstrates that the
transparency of opportunities within a field varies with managers’ exposure to multiplicity and
with the field’s degree of institutionalization. She asserts that organizational fields can be
experienced in one of three dominant forms. Organizational fields can be ‘opaque’ in which the
field is closed, highly isolated or highly institutionalized. Opportunities will appear almost
absent and there will therefore be an inability to mobilize resources and existing routines will
be maintained. Organizational fields can also be ‘transparent’, in which the field is experienced
as open, with several institutional referents in a substantially institutionalized context. In this
state, opportunities will appear plentiful and actors will be able both to define new institutional
arrangements and to gain support and resources to respond to them. Finally, managers can
experience their organizational field as ‘hazy’. In such fields, managers are exposed to extreme
multiplicity. They perceive their field as highly unpredictable and highly complex. Opportunities
are likely to be out of the grasp of managers who will be hard pressed to make sense of and
bring order to their chaotic environment and so will tend to maintain existing routines.
Institutional theory can, therefore, be used to demonstrate that potentially discontinuous
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innovations can be regarded as opportunities within organizational fields. The transparency and
ability to embrace the opportunities are dependent upon managerial cognition of the degree of
institutionalization and multiplicity within their organizational fields.
METHODS
Our research approach is one of theory elaboration (Lee, 1999; Gilbert, 2005), in that we
inductively explore and refine theoretical links that remain incompletely addressed or
overlooked in the literature. We seek to elaborate current theory regarding organizational
response to discontinuous change in two ways. First, we examine the boundary conditions of
existing theoretical predictions of relationships between managerial cognition of threats and
opportunities, and organizational inertia in the form of both resource and routine rigidities (e.g.
Gilbert, 2005). In doing so, we find that while existing theoretical predictions of organizational
inertia are consistent with certain environmental regimes, we identify other regimes where we
identify different mechanisms of organizational inertia. Second, field observations lead us to
consider that the degree to which managers experience their organizational field as
institutionalized (e.g. Dorado, 2005) is important to distinguish between these different
regimes. Consequently we propose novel theoretical links between managerial cognition of
threats and opportunities and the degree to which managers experience their environment as
institutionalized.
We employed a multiple case study design that supports a replication logic, whereby
multiple cases can be seen as analogous to a series of experiments serving to confirm or
disconfirm observations in the data (Yin, 2003). As such, multiple cases enable more robust,
12
generalizable and parsimonious theory development than single case designs (Eisenhardt,
1989a; Eisenhardt and Graebner, 2007). Since we examined theoretical relationships within
organizations experiencing a number of environmental regimes (we ultimately identify five
regimes), we required a large number of cases to achieve theoretical convergence through
replication logic. Each individual episodic case involved an in-depth description and contextual
examination of a single instance or event (Yin, 2003). For each case, longitudinal data was
collected over a period of 6 months to 4 years to allow the researchers to follow the process of
organizational response to discontinuous change.
Research Setting and Sampling
We undertook a theoretical sampling approach (Glaser and Straus, 1967; Yin, 2003), identifying
organizations that were facing potential discontinuous change events.
Two approaches were used to generate our sample of organizations. Theoretical sampling
along a series of polar types (Eisenhardt, 1989a; Silverman, 1999), underpinned our selection of
the first four organizations for this study. We selected one large and one small manufacturer
and one large and one small service-provider. Variation in firm size was considered important
as prior research suggests that issues such as resource dependency, structural differentiation
and political influences affect organizational inertia (Christensen, 1997; Gilbert, 2005), all of
which are likely to vary with firm size. We chose to examine both service and product firms for
two reasons. First, service innovation tends to follow a service-dominant logic that is both
highly routine based and often involves co-creation with customers (ref). This implies a
potential variation in both routine rigidity and resource dependency. Second, product
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innovations tend to be more capital intensive in nature. As such, there could be a possible
variation in resource rigidities between manufacturing and service firms. The four selected
organizations also matched our research aims in four key ways. First, each organization had an
explicitly stated strategy to proactively pursue innovation and each organization was in
possession of a broad portfolio of core and non-core products. This meant that we could
observe resource investment patterns concerning new or improved products and processes.
Second, each was well established, which meant that any organizational inertia should be
observable. Third, each was facing a discontinuous opportunity or threat that required nonlinear internal adaptations. For example, the small manufacturer’s response to the insurgence
of Chinese low-cost producers, or the large service provider’s responses to the emergence of
internet-based financial services would reveal the organization’s sensitivity to these
discontinuities as threats or opportunities. Finally, each organization displayed a prior track
record for innovative capacity, but was now an average performer, which meant that
incidences of organizational inertia would be more likely (Christensen, 1997).
Our unit of analysis is a discontinuous innovation episode. We define this as an episodic
event during which an organization was faced with a potential discontinuous opportunity or
threat. Each of our case studies offers an in-depth description and contextual examination of an
instance or event surrounding each organization’s new product or service development effort,
or its process or business model innovation activities in response to a discontinuous threat or
opportunity. Four main types of discontinuous opportunities and threats were analyzed: (1)
products owned by the case study sites that were impacted by missed opportunities or threats,
14
(2) initiatives with discontinuous potential that were identified and then terminated or frozen,
(3) live projects that were addressing potentially discontinuous threats or opportunities and (4)
opportunities with discontinuous potential that were missed or overlooked by the organization.
For the larger organizations for which we had data across multiple divisions or business
units serving different markets, the data were grouped via these divisions and treated as
separate cases. Importantly, in some instances we observed that organizational response to
discontinuous innovation changed over the data collection period. That is, we observed major
changes in resource investment decisions (i.e. changes in resource rigidities) and organizational
processes and arrangements to use those resources (i.e. changes in routine rigidities). In such
cases the period leading up to the decision to change was treated as a separate episodic case
study from the period during (and after) the implementation of the change.
We collected historical data to contextualize the initial conditions of each organization
(Dyer and Wilkins, 1991; Eisenhardt, 1989a) and coded the subsequent three years of data
collection into discrete event-driven phases (Lawrence, Winn and Jennings, 2001). In total, the
four organizations provided 32 episodic case studies.
Our second source of organizations was identified because they were in organizational
sectors that were highly likely to face discontinuous opportunities or threats over the four year
period of this research. Of the eighty organizations approached, nineteen organizations agreed
to take part in our research, which provided a further 19 episodic case studies to help extend
the replication logic used to further confirm or disconfirm our observations. These
organizations covered a range of industry sectors and the sample contained small, medium and
15
large sized organizations. Table 1 shows each episodic case, the industrial sector and the
amount and type of fieldwork conducted in each organization. There were multiple cases within
the first four organizations (cases 1 to 15 and cases 21 to 29 are within the two large
organizations and cases 16 to 20 and cases 30 to 33 are within the two small organizations), but
only single cases within the second set of organizations (cases 33 to 51). To protect
confidentiality, we have disguised both the names of the organizations involved in this study
and any explicit references to the sources of their discontinuous threats and opportunities.
Insert Table 1 about here
Data Sources
Data were collected from a range of primary and secondary sources within each organization,
as summarized in Table 1. In total, we built 51 episodic case studies by gathering data from
approximately 1,284 hours of field work, over a 4-year longitudinal period (including, 39 site
visits, 69 interviews with 52 managers, 63 workshops (totaling approximately 865 hours with a
total of 162 executive and senior managers from across most business functions), plus analysis
of industry monitoring documents, 298 archival documents and a large number of ongoing
email conversations between the researchers and the managers within the organizations.
Primary data were gathered from executive managers, with responsibility for vision and
strategy and who were answerable to shareholders and influential stakeholders. Senior
operational managers were also interviewed and invited to workshops. We used semistructured interviews and both formal and informal observations to collect the research data.
Formal observations included workshops, which were designed to assess the managers’
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perceptions of their organizational fields, their sensitivity to discontinuous opportunities and
threats and the types of organizational inertia that they faced. This was done by reviewing and
discussing their current and pipeline innovation portfolio and considering whether or not
changes were being planned and implemented in response to threats and opportunities. The
workshops were often held at the organization and the researchers were given tours of the site
to further explain the organizational context and product or service development processes.
These tours also enabled informal conversations, where the researchers made notes afterwards
of salient points raised which related to the research objectives. Secondary data were collected
in the form of archival documents, which included internal reports such as business plans and
market analyses, meeting minutes, internal memorandums, news reports and industry
statistics.
Research Process
Our investigation of the field data was initially informed by distinguishing forms of organization
inertia as resource rigidity and/or routine rigidity (Gilbert, 2005) and distinguishing managerial
perceptions of threat (negative focus, emphasis on loss) from perceptions of opportunity
(positive focus, emphasis on gain) (Dutton, Fahey and Narayanan, 1983; Dutton and Jackson,
1987; Thomas and McDaniel, 1990). A detailed description of how case evidence was used to
establish categories is described below. The data sets were analyzed by two researchers as
recommended by Miles and Huberman (1994). The second researcher’s coding results either
directly replicated and confirmed the coding revealed by the primary researcher or they offered
17
an initially disconfirming perspective that was used to refine or re-clarify the findings presented
in this paper.
We initially arranged our field data of 51 episodic case studies into four categories, based
on the presence or absence of threat and opportunity perception and resource and routine
rigidities. As we show below, our findings revealed a pattern largely consistent with the
theoretical propositions of Gilbert (2005). However, we also identified two grouping of cases
that could not be well explained by extant theoretical perspectives of organizational inertia. We
observed that the managers in the other set of firms perceived a chaotic, uncertain external
environment and struggled to establish concrete courses of action. The managers of these
organizations appeared to be experiencing signals from their environment in very different
ways.
In looking for a theoretical explanation that might explain the observed patterns in our
data, we were motivated to look at neo-institutional theory. Institutional pressures have been
widely offered as explanations a mechanism by which external environment might influence
managerial cognition in terms of accepted rules, practices, beliefs, and conventions (Meyer and
Rohan, 1977; DiMaggio and Powell, 1983; Scott, 2001; Zucker 1977). As we elaborate below, we
particularly drew on the framework of Dorado (2005) who proposed that an organization’s field
transparency may vary from closed (highly institutionalized) to transparent (mid-range) to hazy
(low institutionalization).
Following guidelines for inductive theory development we proceeded to “enfold” these
theoretical insights into our data analysis (Eisenhardt, 1989a; Glaser and Straus, 1967; Miles
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and Huberman, 1994). We developed formally stated observations based on these case
observations. Our analysis proceeded by conducting cross-case pattern sequencing (Eisenhardt,
1989a) and tabular analyses of the cases (Miles and Huberman, 1984). We elicited confirming
and disconfirming information and generated an analytic replication logic (Eisenhardt 1989a;
Glaser and Straus, 1967; Miles and Huberman, 1984; Yin, 2003). As with deductive hypothesis
testing, the formal observations exhibit a consistent pattern, although not all observations
conform perfectly (Eisenhardt, 1989a). Following an iterative cycle of refinement our formal
observations are presented below as research propositions.
ANALYSIS OF DATA
Anchoring with Gilbert (2005)
We commence the exploration of our field data by a cross-case comparison according to the
presence or absence of managerial perceptions of threats and opportunities with respect to
discontinuous innovation and the presence or absence of resource and routine rigidities. We
proceed to compare our data against Gilbert’s (2005) key propositions that (i) perceptions of
imminent threat act to relax resource rigidities and (ii) opportunity perception acts to relax
routine rigidities.
Threat and Opportunity Perception. The field data was examined for instances of
substantial managerial attention (Ocasio, 1997; Hoffman and Ocassio, 2001) directed towards a
potential discontinuous innovation. For those cases where such managerial attention was
absent, cases were classified as exhibiting low levels of both threat and opportunity perception
(Group A in Table 2). As indicated by the quotations in the table, managers were often aware of
19
the potential discontinuous innovation, but did not perceive it to be an imminent threat or
opportunity for the organization.
For cases where we did observe substantial managerial attention directed towards a
potential discontinuous innovation, we classified this attention as treat perception if the
concern was framed in either negative or loss terms towards the firm’s existing productmarkets (Dutton, Fahey and Narayanan, 1983; Dutton and Jackson, 1987; Gilbert, 2005; Thomas
and McDaniel, 1990). Alternatively, framing in positive or gain terms was coded as opportunity
perceptions. As indicated in Table 2, for some cases managerial attention was dominated by
negative or loss perceptions, in which case threat perceptions were coded as high but
opportunity perceptions as low (Group B). In other cases, managerial attention was dominated
by positive or gain perceptions, in which case opportunity perceptions were coded as high but
threat perceptions as low (Group D). Still other cases exhibited a substantial mix of both
opportunity and threat perceptions (Group C).
Insert Table 2 about here
Resource and Routine Rigidity. For each episodic case we examined the level of
organizational inertia, both resource and routine rigidities, by comprehensively examined the
portfolio of projects or organizational activities dealing with either new product development
of any kind or the development of new markets for existing products (or services). Information
on this development portfolio was collected in each interview, and triangulated with data from
annual and strategic reports and observations at strategy meetings and product development
workshops. We explored the degree of resource rigidity exhibited in each case. As indicated in
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the right columns of Table 2, resource rigidity was considered as High when the existing pattern
of resource investments persisted. That is the development portfolio consisted of extensions to
existing product lines, or a planned or linear pattern of market expansion. As such there was no
substantial investment in new projects that addressed discontinuous innovation opportunities
that represented a non-linear trajectory of development (Gilbert, 2005; Christensen and Bower,
1996). Alternatively, resource rigidity was regarded as low when we observed substantial
investment new project(s) that represented a variation from the organization’s earlier
trajectory of development.
We also explored the degree of routine rigidity exhibited in each case. As explained above,
our case investigation comprehensively examined the portfolio of projects or organizational
activities dealing with either new product development of any kind or the development of new
markets for existing products (or services). Our investigation extended to the implementation
of these development projects, focusing on the organizational processes that utilize any new
resource investments directed towards discontinuous innovation (Gilbert, 2005). We examined
both the higher level organizing routines and the embedded operational routines (Nelson and
Winter, 1982). Thus, when observing our cases, evidence of a change in higher level organizing
routines or a change in an embedded operating routine to address discontinuous opportunities
or threats was interpreted to represent low levels of routine rigidity. This included changes in
new product development procedures, inter-firm collaboration, intra-firm collaboration, or
engaging with new market channels, suppliers or customer groups. Alternatively, evidence of a
21
failure to change these routines in the face of discontinuous opportunities and threats were
interpreted to represent high levels of routine rigidity.
Threat Perceptions Relax Resource Rigidities but not Routine Rigidities. Our aggregate
cross-case analyses revealed a striking pattern in our data (Table 2). Group B episodic case
studies have a high level of threat perception, whereas Group A do not (all these cases do not
perceive opportunity from discontinuous innovation). 13 of the 16 Group A cases that
experience a low managerial perception of threat, exhibit high resource rigidity. By contrast,
the all 13 of the cases that experience a high managerial perception of threat (Group B), exhibit
low resource rigidity. Further, we see that all 13 cases maintain a high level of routine rigidity.
For example, SemiCon is a specialist manufacturer of semiconductor and computer testing
equipment. The managers expressed a threat, particularly from Taiwanese competitors who
were making strong technological advances and had a cost advantage. Although Semicon
invested in a new technological development project, they encountered resistance to the new
technology when they attempted to transfer it to the production site. As expressed by one
Senior Technologist:
“Yeah…we keep up with stuff that lets us squeeze improvements out of our
products, but if you asked anyone to significantly change the way they work, you
might have to wait for hell to freeze over…”
This pattern of evidence corroborates Gilbert’s (2005) proposition that managerial
perceptions of threat act to relax resource rigidities, but amplify routine rigidities.
Opportunity Perceptions Relax Routine Rigidities. Comparing Group B with Group C, our
22
analysis reveals those episodic cases in Group C exhibit evidence of opportunity framing of
discontinuous innovation and unlock routine rigidities. For example Test & Measure is a leading
manufacturer of testing and measurement equipment that embraces and drives discontinuous
change. As explained by a Senior Engineer, organizational routines are changed regularly:
“Everyone here accepts that each product we come up with and every bit of
technology and knowledge we use has a limited lifespan. When you accept that,
change becomes the norm... in fact, people like me have become notorious for
putting themselves or their mates out of a job… If you can automate it, or engineer
it out, then you can free up people’s time to do something new and even more
interesting.”
Whereas all 13 Group B cases that exhibit low opportunity perception showed evidence of
routine rigidity, all 11 Group C that exhibit high opportunity perception cases reveal evidence
that they overcome routine rigidities. This evidence largely corroborates Gilbert’s (2005)
proposition that managerial perceptions of opportunities act to relax routine rigidities.
Departure from Earlier Research. Despite a high correspondence of much of our field data
with these propositions of Gilbert (2005), we were also unable to adequately explain a
substantial number of the episodic cases based on existing theorizing.
First, 11 of our episodic cases (Group D in Table 2) exhibited low routine rigidity, but high
resource rigidity. Within these cases, managers often challenged and changed existing
routines, sometimes illicitly. But attracting funds for discontinuous innovation. As an example,
the head of the Divisional Innovation Team for AeroSoft Sense-maker explained:
23
“I’m encouraging my guys to break the rules if they need to. Although I’m still
finding it difficult to get approval for funds, especially for ideas that could
cannibalize our existing business.”
This pattern of organizational inertia, resource rigidity but not routine rigidity, represents a
departure from the observations of earlier research (e.g. Gilbert, 2005; Tripsas, 1997;
Christensen and Bower, 1996).
We were also struck by the observation from our field data for our cases exhibiting
resource and/or routine rigidities (Group A) that they appeared to exemplify two distinct
categories of cases. The managers in one set of firms perceived their industry as a very closed
and structured environment and believed in the essential viability of the status quo. In stark
contrast, the managers in the other set of firms perceived a chaotic, uncertain external
environment and struggled to establish concrete courses of action. The managers of each group
of cases appeared to be experiencing signals from their environment in very different ways.
Institutional Field Transparency
In looking for a theoretical explanation that might explain the observed patterns in our
data, we were motivated to look at neo-institutional theory. Institutional pressures have been
widely offered as explanations a mechanism by which external environment might influence
managerial cognition in terms of accepted rules, practices, beliefs, and conventions (Meyer and
Rohan, 1977; DiMaggio and Powell, 1983; Scott, 2001; Zucker 1977). We proceeded to enfold
these theoretical insights into our data analysis (Eisenhardt, 1989a; Glaser and Straus, 1967;
Miles and Huberman, 1994). As we elaborate below, we particularly drew on the framework of
24
Dorado (2005) who proposed that an organization’s field transparency may be experienced by
its managers as varying from closed (highly institutionalized) to transparent (mid-range) to hazy
(low institutionalization).
Following Dorado (2005), we explored each case according to two characteristics (a) the
degree of institutionalization as experienced by the actors (managers at each case site) (e.g.
Zucker, 1977) and (b) conversely, the degree of multiplicity experienced by the managers (e.g.
Whittington 1992). To assess the degree of institutionalization as HIGH, the following four
specific conditions would need to be present in our field data. First, we would expect to see a
high degree of conformity regarding cultural understandings of accepted rules, practices and
beliefs (DiMaggio and Powell, 1983). Second, legitimacy would be perceived as a strong
pressure to maintain the status quo (Zucker, 1977). Third, no questions arise in the minds of the
managers about whether embedded approaches are the natural way to effect some kind of
collective action (Hannan and Freeman 1989; Oliver, 1991). Forth, the organizational field
would be stable and slow to change (Zucker, 1977).Furthermore, as DiMaggio and Powell’s
(1983:148) work demonstrates that firms can only be considered institutionalized if they are
themselves part of institutionalized organizational fields, each cases’ organizational field would
have to demonstrate specific features. Firstly, we would need to witness sharply defined
interorganizational structures of domination and equally sharp patterns of coalition; secondly,
high levels of mutual awareness among participants in a set of organizations that are involved
in a common enterprise; and finally, high levels of demanding information transfer between
organizations.
25
When assessing the counter concept, multiplicity, we examined the extent to which
managers were exposed to multiple, conflicting referents from their organizational field. Prior
research recognizes that institutional structures operate at multiple levels and across multiple
sectors. Managers experiencing an organizational filed with a high level of multiplicity were
uncoupled from a single recognized area of institutional life and exposed to and receptive of
the routines, customs and resources of other fields (Greenwood and Hinings 1996: 1023;
Whittington 1992; Seo and Creed, 2002).
Opaque organizational field. Eight cases were classified as Opaque organizational field, as
they were characterized as having both a very high institutionalization and very low multiplicity
based on the experiences reported by senior managers (see Table 3).
The managers at these eight case sites reported a highly stable and rigid institutional
environment in which the organization was strongly embedded. For example Rigid Plastics was
a plastics molding manufacturer that had recently separated from a US parent organization.
However it remained closely linked and focused on the former parent and its traditional
customer base. Prior to the company being displaced from one of its major product-markets
(two months prior to our research) senior management reported that they regarded the
industry as stable and robust. The Director General recalls
““We had bought-out the operations and were so focused on maximising our links
and profits to our mother company that we doubled our efforts at aligning our
processes and improving efficiency and didn’t really stop to think about what was
going on in the world outside. Looking back, I guess it was sort of naïve”
26
Forward Finance Efficiency was a division of a major, global finance company. Despite the
emergence of internet-based firms at the low end of the market, managers resolutely believed
in the established modes of service delivery. They regarded working within the established
institutional environment of the sector as essential for legitimacy:
“Who do we interact with outside our customer base and trusted IT people?
[Laughs]. Look, this sector’s focus has not changed for years. If we started talking to
new people, word would get out, and our credibility might be questioned….unless
there were efficiency gains to be made.” [Customer Service Director].
These quotes also reflect the low level of multiplicity observed at each site. Rigid Plastics
dependence on its parent and its established customer base had led to Rigid Plastics becoming
a highly institutionalized commodities provider that was insulated from actors in other markets.
Forward Finance Efficiency management was focused on improving efficiency through
technology driven process improvements. The scope of executive engagement did not exceed
the traditional finance sector and high-end technology solutions providers.
Transparent organizational field. Eleven organizations were classified as having
Transparent organizational fields, with a medium level of both institutionalization and
multiplicity.
In these cases we managers reported convergence around accepted practices and norms,
but not to a degree that constrains them from engaging in change they view as warranted. For
example, Test&Measure, a leading manufacturer of testing equipment, had maintained a
27
business philosophy since the organizations inception that was strongly embedded with its
industry and embraced a strong customer engagement, yet continuously sought to change and
broaden its customer base. As explained by the Deputy Managing Director:
“Basically, we focus on what adds value to our customers – current and potential –
and we outsource everything else. Once we’ve developed a product that becomes
good enough, we look for a way to get it out, or to make it cheaper. All this means
this firm is constantly changing.”
We observed that manager at Clear Plastics, a plastics molding organization was somewhat
open to new ideas and ways of doing things. They CEO had implemented new management
tools such as an ideas management process and portfolio management. While some openness
was embedded within the organizational, management largely continued to embrace
traditional approaches and focused on incremental improvements:
“The boss had got a little out of control. He was trying to change everything! Now
we’ve adapted our old new product development process to incorporate some of his
new thinking, which makes sense. We get it. They’ve used these new portfolio maps
to explain why we need to address our bias towards just improving our existing core
product categories.” [Day-Shift Manager].
A moderate level of multiplicity was observed where managers reported several
institutional referents and described exploitable tension between conflicting institutional
structures. Test&Measure was happy to engage with new market actors. While this generated
multiple conflicting referents, this was embraced positively with a culture of learning:
28
“We network like crazy and spend a lot of time talking to familiar and unfamiliar
markets. Everyone loves it here. We’re all constantly learning.” [Deputy Managing
Director]
Within Clear Plastics we observed a broadening of engagement with actors beyond the
organization’s traditional institutional field. For example, for the first time they had engaged in
negotiations for licensing agreements with manufacturers and dealers with access to
international markets. Similarly, they started to engage with competitors serving international
markets to discuss contract manufacturing.
Semi-Opaque Organizational Field. By studying the different patterns in our data, careful
examination of the case data revealed thirteen of our cases an intermediate state between
Opaque and Transparent that we labelled Semi-Opaque.
Institutionalization was high, as these organizations experienced a relatively stable
organizational field, but displayed limited flexibility to change, and future actions were
predominantly influenced by past experience and norms. As an example, Bound AeroLever is a
division of a military products firm that was seeking to commercialize technologies in nonmilitary markets. They had recently lost a number of key managers through retirement and
general turnover of employees. The remaining and generally less experienced managers,
although guided by accepted organizational and industry practices, at the same time did not
feel strongly constrained by historical norms:
“We’ve lost the head of our innovation team, and quite a number of the gang
who’ve been pushing the innovation agenda at our level. Off to pursue pastures
29
new. I don’t know about the others here, but I feel a bit lost. We’ve had to create a
more formal ideas pipeline for decision making, but it feels like we’re missing
something. Perhaps even narrowed our focus.” [Senior Technologist].
Another example is Semicon, a specialist manufacturer of semiconductor and computer
testing equipment. Although they had entered the market some years earlier with a
breakthrough technology, they were now focused on exploiting this technology. Managers
viewed their industry as highly dynamic, and the firm had developed a reputation for by rapid,
continuous improvement of their core products. Yet developments remained incremental in
nature, and their behavior mimicked typical firms in this dynamic sector. As explained by their
Senior technologist:
“ … our industry does not sit still for long…. What delighted the customer yesterday,
is expected today, and tomorrow they want it at half the costs. So we have to stay
on top of the latest developments”
Multiplicity was observed to be low-to-medium, as although managers had a little exposure
to conflicting institutional referents, these were not sufficient to create substantial tension.
Although looking to network broadly, Bound AeroLever’s inexperienced managers had more
limited networks outside their current market boundaries than their predecessors. Semicon’s
managers also actively sought to develop networks as a source of new knowledge, although
these were predominantly within their traditional industry boundaries and hence typically did
not result in conflicting institutional referents:
30
“… we’ve got an established network to help us with that. It stops us becoming too
fixed on what we do.” [Chief Technology Officer].
Hazy organizational field. At the opposite end of the spectrum, nine cases were classified
as Hazy where we observed evidence of very low institutionalization and very high multiplicity.
At these sites, managers reported a fluid industry context involving a dynamic set of
institutional actors and new industry rules.
For example Design Overload is a new innovation division of a design consulting
organization. It was established to focus on innovation process consulting to both internal and
external clients and lives from project to project. Managers did not appear to be constrained by
their institutional environment. As the Divisional Director stated:
“My division was established because we could feel both an internal and a market
need, but we couldn’t quite see what the division should look like or how it should be
managed. It’s the first team of its type in this country… we’re creating the rules.”
Exposed Plastics, a European plastics molding firm, had been displaced from their major
markets by lower cost structure Asian competitors. The Asian competitors had, over recent
years, invested in technology development and now produced products rivaling Exposed
Plastic’s products. The executive management team no longer felt constrained by traditional
industry frameworks and were searching broadly for new opportunities:
“we’ve (the executive management) have been focused on looking around the world
for new opportunities.”[General Manager]
31
We also observed strong indications of high multiplicity with reports of high levels of
interaction with various institutional referents. The managerial team was in fact pro-active in
engaging with multiple fields. These referents generated significant conflict and uncertainty.
“I encourage my team to explore all possible avenues. We leave no stone unturned.
Consequently, it can be a knowledge management nightmare.”[Divisional Director,
Design Overload]
“But there’s so much information and so many areas where we could contribute that
it’s hard to know where to start. We spend more time than ever......trying to make
sense of unfamiliar markets. Sure, it’s exciting, but how do you know where to make
the gamble? “[General Manager, Exposed Plastics]
Semi-Hazy organizational field. Finally, eleven of our cases were assessed to experience
their organizational field as between Hazy and Transparent, which we labelled Semi-Hazy. In
these cases, institutionalization was medium-to-low, where institutional conditions were quite
flexible, but there was also evidence of some limited convergence towards accepted practices,
norms and values.
For these case sites, multiplicity was observed to be medium-to-high, where managers
reported exposure to numerous institutional referents, but predominantly described confusion
rather than exploitable tensions.
32
For example NewMuse is a new start-up firm that integrates software and components into
novel architectures to revolutionize the music products industry.
“My continual conversations with people in the IT, music and manufacturing
industries led me to see that there were too many assumptions that simply were not
being challenged in the music industry. And too many customers being treated badly
or overlooked. So I sat down with a team of smart, diverse people and invented a
new way of learning and playing music.” [Chief Executive Officer].
Insert Table 3 about here
The Influence of Institutional Field Transparency on Managerial Cognition and Organizational
Inertia
We have seen that the managerial experience of organizational field transparency varied
significantly across our cases. The aggregated data and cross-case comparisons revealed that
organizational field transparency was directly related to a manager’s sensitivity to both
discontinuous threats and opportunities, and to the intensity of resource and routine rigidities
that they faced within their organizations, as summarized in Table 4. The table illustrates a
remarkably consistent pattern across cases. We proceed to elaborate the behavior we observe
for cases in each category of field transparency.
Insert Table 4 about here
Organizational Inertia when Managers Experience Opaque Organizational Fields
Of the seven cases where we assessed managers experienced their organizational field
Opaque (high institutionalization and low multiplicity), we observed six cases for which
33
managerial perceptions of threat from discontinuous change were low, and all seven cases
perceptions of opportunity were low. In essence, in a highly institutionalized, closed
environment, managers fail to direct attention towards discontinuous change.
For some (retrospective) episodic cases, managers reported that they were simply unaware
of threat prior to disruption and hence had been concentrating on business as usual. For
example, Rigid Plastics had recently gained independence from its parent in the Unites States
and was still focused predominantly on serving its former parent’s needs and customers. Two
months prior to the initiation of this research, Rigid Plastics was unexpectedly displaced from
one of its core markets. Executive management had to cut their losses on that product and
attempted to redirect their investment and competencies towards other products within their
organization:
“We were so focused on maximizing our links and profits to our mother company
that we doubled our efforts at aligning our processes and improving efficiency and
didn’t really stop to think about what was going on in the world outside. Looking
back, I guess it was sort of naïve.” [Director General].
For other cases, managers were aware of potential discontinuous change but remained
resolute in their belief regarding the status-quo of the industry and traditional ways of doing
things. For example, managers at Forward Finance Efficiency, a division of a global finance
provider, were fully aware that internet-based competitors were providing very similar financial
products to their own. As a consequence, margins were getting squeezed. However, senior
34
management remained resolute that there was no need to alter from their traditional way of
doing business. As explained by the Marketing Manager:
“I accept that there might now be some people (customers) who are reckless enough
to put up with a poor product and no service…but these people are not people we
want. As for generating some returns from our investments, we just have to educate
the customer.”
With little or no managerial attention directed towards discontinuous change, there is little
surprise that the organizations remained inert with respect to both resource and routine
rigidities. We observed the presence of both resource and routine rigidities for all seven cases.
Forward Finance Efficiency’s innovation efforts focused exclusively on efforts to reduce cost and
improve efficiency, primarily through the implementation of IT based solutions. Rigid Plastics
recalled that they failed to alter investment patterns or routines:
“Perhaps you’d think that the loss of [Product A] would have made us invest in new
opportunities. But we had no opportunities to speak of really, other than
streamlining for our main customer in the States.”[ Sales Manager]
“I know the market is now different, but if we’d have stopped for just a minute, and
challenged what else is going on, perhaps we would have been able to change our
business model and still be a player.” [Director General, Rigid Plastics].
These conditions and the links between them are summarized in Table 5 and formally
expressed as our first proposition:
Proposition 1: Organizations whose managers experience their organizational field
35
as opaque will either be unaware of potential discontinuous change or remain resolute
in their belief of the status quo. Consequently they will not direct substantial managerial
attention to discontinuous threats and discontinuous opportunities and will not be
motivated to overcome either resource rigidities or routine rigidities.
Insert Table 5 about here
Organizational Inertia when Managers Experience Semi-Opaque Organizational Fields
For all 13 cases that we assessed as experiencing a semi-opaque organizational fields
(moderate-to-high institutionalization and moderate-to-low multiplicity) we observed high
levels of managerial attention towards discontinuous change. Under these slightly open
institutional conditions we observed that while imminent threat became visible to managers,
they failed to identify potential opportunities. As such they maintained a reactive stance to
defend against the external threat, rather than taking a proactive stance looking for
opportunities.
One such case was Semicon, a specialist manufacturer of semiconductor and computer
testing equipment. At the time of our investigation, the company had maintained a near
monopoly for one of their major product lines Product S2. However senior management viewed
the institutional environment as dynamic, yet stable. They were acutely aware of the
technological advances being made in Taiwan and the potential threat that this posed to their
business. However, they remained rather closed to pursuing discontinuous opportunities. As
explained by the Marketing Director:
36
“Let’s be honest, we could have taken Product S2 to Taiwan at least two years ago,
invested to protect the intellectual property and benefited from significantly lower
production costs for all that time. In short, we were just too scared. We’re not good
at seeing the up-side of big change.”
Another example is Bound AeroLever, a division of a military products firm that was seeking
to commercialize technologies in non-military markets. They had recently lost a number of key
managers and the remaining executive generally had a more narrow experienced dominated by
their current industry experience. Consequently they tended to rely on traditional, familiar
approaches. Managers were again aware that a number of their major product lines were
under threat from advances by industry competitors. In response, the innovation portfolio was
narrowed to defend traditional markets rather than search for more discontinuous
opportunities:
“We’ve lost the head of our innovation team, and quite a number of the gang
who’ve been pushing the innovation agenda at our level. Off to pursue pastures
new. I don’t know about the others here, but I feel a bit lost. We’ve had to create a
more formal ideas pipeline for decision making, but it feels like we’re missing
something. Perhaps even narrowed our focus.” [Senior Technologist].
Feeling under threat, twelve of the thirteen cases were motivated to commit resources to
change. However all thirteen organizations relied on existing, familiar routines that constrained
effective action. For example, Semicon invested in new manufacturing facilities in Taiwan.
However this late move was a defensive stance to catch up to Taiwanese competitors, rather
37
than an early preemptive move that could have secured unique IP protection. They had also
invested in a new technological development S1. However, there were concerns in the ability to
exploit this new technological advancement:
“We’ve invested loads of money into Project S1. And of course, we wouldn’t have
been able to do that at this site (operations). There’s too much resistance to the new
technology. I’m just worried about when it becomes fully feasible and has to come
over here.” [Program Manager]
“…we keep up with stuff that lets us squeeze improvements out of our products, but
if you ask anyone to significantly change the way they work, you might have to wait
for hell to freeze over… even if it was because of a serious threat.” [Senior
Technologist]
Bound AeroLever the response to imminent threats by the relatively inexperienced
management team was to adopt a more formalized innovation process. The company’s
innovation portfolio review redirected funds towards projects to defend their traditional
markets rather than to explore opportunities in unfamiliar markets.
These conditions and the links between them are summarized in Table 6 and formally
expressed as our second proposition:
Proposition 2: Managers who experience their organizational field as semi-opaque
will be attentive to discontinuous threats which are more visible than discontinuous
opportunities. Under threat managers will be motivated to relax resource rigidities, but
the will rely on existing practices whereby routine rigidities will continue to constrain
38
effective action.
Insert Table 6 about here
Organizational Inertia when Managers Experience Hazy Organizational Fields
We now contrast our observations of organizations at the other end of the spectrum where
managers experienced extremely low levels of institutionalization and multiple, conflicting
signals. Of the nine episodic cases were classified as Hazy, we observed managers attentive to
specific opportunities for discontinuous change in only one case, and attentive to discontinuous
threats in none of the cases.
The reasons that managers failed to perceive threats and opportunities were observed to
be very different to the highly institutionalized (Opaque organizational field) cases. These
organizations had typically been disrupted from at least one of their core product-markets
sometime earlier, and were now proactively searching for opportunities well beyond their
traditional institutional context. In the resulting highly fluid and open institutional
environments, managers were exposed to vast amounts of conflicting signals and complex
information from many sources. We observed a consistent pattern where managers
consequently struggled with sense making of the complex environment, particularly as this
multifaceted context conflicted with traditional notions of the industry context and/or the
organization’s position within it. Consequently, too many possibilities diluted collective
managerial attention to any specific discontinuous opportunities. Exposed Plastics had been
disrupted from one of their core markets, and the executive management had begun a
39
proactive a wide ranging search for market opportunities for their molding technology. As
expressed by the General Manager:
“We spend more time than ever challenging our processes and trying to make sense
of unfamiliar markets. Sure it’s exciting but how do you know where to make the
gamble – risk is a major issue right now.”
A similar situation was observed at DesignOverload. It was recently established as an
autonomous “innovation division” of an established design consulting firm. Yet the openness
of their charter and lack of defined boundaries left the team struggling to identify clear
opportunities.
“We leave no stone unturned. Consequently, it can be a knowledge management
nightmare… I think it’s because we’re trying to manage too much information at
once. I’m certain it’s blinding us.” [Division Director]
Interestingly, we also observed that the noise produced by this broad, divergent span of
attention tended to also masked new threats from competitors closer to home in their
established markets. For example, Exposed Plastics invested in an incremental Project A3 that
added more functionality to their top-of-the-range product in a core market. Yet at the same
time they did not respond to clear signals that the lower end of this market was at risk to
competing technology introduced by low-cost Chinese competitors. DesignOverload’s senior
management, preoccupied by the endless opportunities available, failed to pay attention to the
potential threat posed by more traditional, large strategy-based consulting companies
innovating to directly compete in core market niche. As explained by a project manager:
40
“We’re not seeing the fact that there are other, more strategy based consulting
firms, which could easily take the space that we are trying to move into.” [Design
Overload].
Under these conditions where both specific opportunities and threats were obscured by a
sea of complexity, organizations failed to invest in discontinuous change and retreated to
familiar ways of doing things. At Exposed plastics, for example, a series of innovation projects
were suspended due to a lack of clarity:
“Right now we’ve got a great idea to radically enhance our [disrupted] core product.
As we don’t know what other opportunities new markets will offer, I’ve decided not
to go with it.” [Director General]
“We kick started [Project A2] off the back of some conversations within the wine
industry. But the early market is too small compared to what we’re used to. I think
we could make more money elsewhere. We need more time, better processes and
better tools to make sense of our options.”
At DesignOverload, a series of potentially discontinuous innovation projects were
suspended because the executive team feared that they would take resources away from other
‘less risky’ projects. Under these conditions of high uncertainty, they resorted to familiar
routines. As the Divisional Director stated:
“We’ve got a great diverse team of people together. Individually, we’re great at
seeing bold opportunities for our clients, but then we spend so much time debating
41
and managing by committee, that we end up a bit spineless. Giving them watered
down ideas.”
“We’ve all come to this team with prior experiences and ways of doing things.
What’s funny is how everyone of us reverts back to old routines when put under
pressure. In part this is constraining, but in time, we’ll learn from each other and
we’ll develop our own unique way of making sense of what we see. I’m sure we’ll
soon become great change agents.”
These conditions and the links between them are summarized in Table 7 and formally
expressed as our third proposition:
Proposition 3: Managers who experience their organizational field as hazy, will find
sensemaking of complex and conflicting signals challenging which acts to masks threats
and dilutes attention to specific discontinuous opportunities. In the face of high
uncertainty, they will find investment too risky (resource rigidity) and rely on familiar
routines (routine rigidity).
Organizational Inertia when Managers Experience Semi-Hazy Organizational Fields
For the eleven cases were assessed as experiencing a Semi-Hazy organizational field, we
also observed substantial challenges of sense-making among managers, but less so than Hazy
fields. With fewer conflicting signals and a little more convergence towards established norms
and conventions, in all eleven case sites we observed clarity towards specific discontinuous
opportunities. However, with managerial attention pre-occupied with opportunities, attention
was diverted from possible threats closer to home.
42
An exemplar is Aerosoft Sensemaker, a software division of an avionics firms. Despite
ongoing investment in continuous improvement and innovation for two of its existing core
product, these product-markets were suffering from diminishing rates of return. As a
consequence, the senior management teams had been actively exploring new opportunities.
Although this highly open search resulted in challenges to sensmaking of possible
opportunities, in some instances, collective sensemaking was resolved. As explained by the
Senior Technologist:
“Then we discovered that our skills would offer them [a potential customer] the very
solution they needed and at a much lower cost…I held a project scoping
meeting….everyone there could see it would work, it was a no-brainer, I can’t
believe we hadn’t thought of it before…we keep finding these sorts of opportunities
these days.”
Yet a managerial pre-occupation with possible new opportunities diverted senior
management away from local treats. Despite the innovation team proposing to the executive
team to invest in a new offering at the low end of one of their product-markets, but the
executive team remained unconvinced of the likelihood of a threat. Later that year, a new
organization entered with a product that targeted that low end of the market.
For all eleven Semi-Hazy cases we observed that the strong managerial attention towards
new opportunities encouraged member to alter existing routines, often in
“I’m encouraging my guys to break the rules if they need to. Although I’m still
finding it difficult to get approval for funds, especially for ideas that could
43
cannibalize our existing business.” [Divisional Innovation Team Head, AeroSoft
Sense-Maker]
However, despite optimistic attitudes evident towards opportunities, we did not observed
substantial investments in new opportunities at any of the nine case sites. For example:
“I just wish that ‘upstairs’ would be more prepared to accept what we say and give
us more resources.”
[Head of Innovation Team, AeroSoft Sense-Maker].
“It’s better to invest where you can clearly measure a return on investment with a
recognizable customer base than to probe in the dark.” [Finance executive, AeroSoft
Sense-maker]
By comparing to cases where investment did occur, we would infer that it was the absence
of a strong imminent threat that prevented organizations from overcoming their resource
rigidities.
For example NewMuse is a new start-up firm that integrates software and components
into novel architectures to revolutionize the music products industry.
“My continual conversations with people in the IT, music and manufacturing industries led
me to see that there were too many assumptions that simply were not being challenged in the
music industry. And too many customers being treated badly or overlooked. So I sat down with
a team of smart, diverse people and invented a new way of learning and playing music.” [Chief
Executive Officer].
44
These conditions and the links between them are summarized in Table 8 and formally
expressed as our forth proposition:
Proposition 4: Managers who experience their organizational field as semi-hazy will
partially resolve sensemaking to identify many discontinuous opportunities and
overcome routine rigidities through experimentation. However, unresolved
sensemaking and managerial focus on opportunities diverts attention from threats.
Consequently resource rigidities remain as managers will not be sufficiently motivated
to invest in uncertain discontinuous opportunities.
Insert Table 8 about here
Organizational Inertia when Managers Experience Transparent Organizational Fields
Finally we identified eleven episodic cases where we observed the organizational field as
Transparent, a balance in between highly institutionalized and fluid and chaotic. Managers
experiencing a moderate degree of institutionalization, with convergence around accepted
practices, norms and values, but enough flexibility to engage in change should they see fit. In
these cases, managers were attentive to their environment, but also were able to sufficiently
make sense of the environment and manage tensions derived from conflicting signals from
multiple sources. These conditions were conducive to direct substantial managerial attention
towards both discontinuous threats but also specific opportunities for discontinuous change in
all eleven cases. We observed that this balanced orientation fostered investment in
45
discontinuous change projects, and allowed managers the flexibility to enact changes in
organizational routines when these were required.
For example, by operating with flexible and open institutional arrangements,
Text&Measure was able to forge partnerships with Universities to pursue opportunities to
commercialize new technologies. This form of organizational arrangement was new to the
company:
“After I saw this PhD student deliver his presentation, I thought what a great
opportunity! So I brought him in to meet the team. He now works for us and we
share the intellectual property with his university bosses. It makes sense to join
forces, especially as this was an unchartered market for us. Actually, lots of our
chaps joined us this way.” [Deputy Managing Director, Test&Measure].
Similarly, an open institutional mindset with respect to the boundaries of the industry,
allowed the company to both recognize an pursue an opportunity in a lower-tier of the market.
“We realized a while ago that the sophisticated piece of kit [Product K1] that we sell
to the environmental agencies could be dumbed-down and used by mechanics. So,
we build a new, simpler device and realized that with a few improvements it could
eventually replace [Product K1], so we set to work. If we don’t do it, someone else
will jump on this.” [Deputy Managing Director, Test&Measure].
Another examplar, Clear Plastics, had implemented a strategic review and new innovation
management process. This allowed senior managers to more clearly delineate the boundaries
of their organizational field. The company terminated innovation efforts in the middle and
46
lower tiers of their core product ranges and redirected resources to a “new opportunity
pipeline”. With an open but clearly delineated organizational field, they partnering with new
organizations. This flexibility had enabled them to start delivering reasonable returns from
these new discontinuous product ideas and business models.
“We worked with some new friends [new partners to the organization] and
developed a more formal, transparent innovation process that’s inclusive of
incremental improvements to our processes and products, and also supportive to
those of us who want to push the boundaries.” [R&D Director, Clear Plastics]
These conditions and the links between them are summarized in Table 9 and formally
expressed as our fifth proposition:
Proposition 5: Managers who experience their organizational field as transparent will be
attentive to both discontinuous threats and specific discontinuous opportunities. There is
sufficient motivation and acceptable uncertainty to invest in discontinuous change (overcome
resource rigidities). Managerial attention towards specific discontinuous opportunities
encourages new organizational approaches acting to unlock routine rigidities.
Insert Table 9 about here
DISCUSSION AND CONCLUSION
This paper set out to explore how some organizations can engage in discontinuous
innovation despite constraints imposed by organizational inertia and institutional rigidity.
Specifically, we elaborate a link between the way in which an organization’s managers perceive
their institutional environment, their perceptions of opportunities and threats to discontinuous
47
change, and the organization’s ability to overcome resource and routine rigidities. Formally, we
used our analysis of observations from 51 episodic case sites to develop five propositions which
predict how managerial perceptions and organizational inertia vary as the organizational field
varies from Opaque to semi-Opaque to Transparent to Semi-Hazy to Hazy. Figure 1 summarizes
our interpretive model of these relationships.
Insert Figure 1 about here
Resource and Routine Rigidities
In his 2005 article, Gilbert distinguished two forms of organizational inertia in the context
of discontinuous innovation: resource rigidities, or the failure to change resource investment
patterns and routine rigidities, or the failure to change the organizational processes that use
those resource investments. He suggested that a high level of perceived threat acts to lower
resource rigidities, but reinforces routine rigidities. He also proposed that ‘opportunity framing’
can help to overcome routine rigidities. In doing so, he reconciled seemingly contradictory
evidence from earlier studies that. Some previous studies had suggested that the perception of
a discontinuous threat can motivate change (e.g., Barr and Huff, 1997; Huff et al., 1992; Lant et
al., 1992), while others claimed that when faced with the perception of a discontinuous threat,
incumbent organizations often fail to react (e.g., Christensen and Bower, 1996; Dutton and
Jackson, 1987; Leonard–Barton 1992, Staw et al., 1981; Tushman and O’Reilly, 1996).
Our findings both corroborate and extend Gilbert’s (2005) ideas. First, our study provides
important empirical evidence that supports the notions of resource and routine rigidities, and
their relationship to both threat and opportunity perceptions. Our observation of 13 cases that
48
experience semi-opaque organizational fields is that they also exhibit high threat sensitivity and
low opportunity sensitivity, similar to the majority of newspaper organizations in Gilbert’s
study. Experiencing high threat sensitivity, 12 of the 13 cases overcame resource rigidities and
invested in innovation, but all 13 cases continued to exhibit inertia through high routine rigidity.
Likewise, our seven cases that experience opaque organizational fields correspond to Gilbert’s
observations of his newspaper firms at earlier time periods. In the absence of either clear
threat or clear opportunity perceptions, organizations are content with the status-quo and
exhibit both resource and routine rigidities.
Our findings also provide empirical support for Gilbert’s proposition that “opportunity
framing” can act to overcome routine rigidity. Our 11 cases that experience transparent
organizational fields have a strong perception of threat, but also clearly perceive opportunity.
All 11 of these cases overcame inertia and both invested in new opportunities, and adjusted
routines to accommodate these opportunities. Thus we corroborate Gilbert’s core empirical
findings, and importantly show that his ideas appear to be generalisable beyond the context of
the newspaper industry.
However, our empirical evidence did not support Gilbert’s proposition that structurally
separating the innovation activity as a new venture unit was necessarily required to overcome
routine rigidities. Our observations included some organizations that did create structural
separation, but also many that did not. Understanding the organizational characteristics that
tend to require structural differentiation to overcome routine rigidity, and those that do not,
provides an interesting opportunity for future research.
49
Elaborating Conditions of Resource and Routine Rigidities
Our emergent findings and propositions also extend the ideas of Gilbert (2005) in two
ways. First, our 11 case examples that experience semi-hazy organizational fields, and 6 cases
that experience hazy organizational fields, extend beyond the theoretical and empirical context
of Gilbert. As such, we suggest a boundary condition for Gilbert’s ideas.
In semi-hazy organizational fields, we propose that managers become highly aware of
discontinuous opportunities, but are blinded to discontinuous threats. Whilst they are able to
tackle routine rigidities, especially for clandestine new market explorations, resource rigidities
maintain the inertia of the organization. We also propose that managers who experience
organizational fields described as opaque and hazy are unlikely to have much sensitivity to
discontinuous opportunities and threats.
Second, by linking managerial perceptions of threats and opportunities to discontinuous
innovation to perceptions of organizational field transparency, we serve to increase
understanding of the conditions that lead to inertia to discontinuous change – both resource
and routine rigidities. Our propositions suggest that an organization’s institutional environment
is instrumental in determining managerial perceptions of threats and opportunities, and
consequently different forms of organizational inertia. As such, we also provide a theoretical
link between research that focuses on institutional change and organizational inertia research.
Organizational Field Transparency
In her 2005 article, Dorado introduces the concept of organizational field transparency to
opportunities for institutional change. Our study provides, to the best of our knowledge, the
50
first empirical support for some of the core theoretical ideas espoused by Dorado. In particular,
we observe that as levels of institutionalization and multiplicity in the organizational field
varies, so does the transparency of the organizational field to perceptions of opportunities for
engaging in discontinuous innovation. Moreover, consistent with Dorado’s propositions, we
observed low opportunity sensitivity for all 7 cases experiencing opaque organizational field
transparency, high opportunity sensitivity for all 11 cases experiencing transparent
organizational field transparency and low opportunity sensitivity for 8 of our 9 cases
experiencing hazy organizational field transparency.
We acknowledge that the focal opportunity perception in our work – the opportunity for
an organization to pursue discontinuous innovation – is not the same as that of Dorado who is
concerned with the opportunity for agency to bring about institutional change. However, the
organization’s decision to pursue discontinuous innovation is clearly made within its
institutional context. Discontinuous innovations by their very nature are incompatible with
existing institutional logics, violating institutional expectations with regard to product,
technology or market developments (Aldrich and Fiol, 1994; Christensen, 2003; Dougherty and
Heller 1994;). Indeed, a recent study by van Dijk et al. (2011) has investigated the legitimizing
behaviors of organizations engaged in radical innovation. Hence, perceptions of opportunity to
pursue discontinuous innovation can be regarded as a sub-component of the opportunity to
engage in this kind of institutional change.
Elaborating the Concept of Organizational Field Transparency
51
Our emergent findings and propositions also extend the ideas of Dorado (2005) in two
ways. First, while Dorado focused only on perceived opportunities for institutional change, our
case examinations revealed that it is critical to consider perceived threats to discontinuous
change in addition to perceived opportunities. We discerned threat and opportunity
perceptions as quite distinct constructs and observed that the degree of threat to
discontinuous change perceived by managers was markedly different to that of opportunity
perceptions in 23 of our 51 cases.
It remains somewhat of an open question whether the critical role of perceptions of
threats is specific to the context of discontinuous change, or whether threat perceptions might
be relevant more generally to better understand the phenomena of institutional change.
Threats from discontinuous change are quite different in character to other forms of
institutional change. None-the-less, impending institutional change can be quite threatening for
organizations. It is an interesting avenue for future research to explore whether perceptions of
threat of institutional change may act as a catalyst for agency differently from perceptions of
opportunities.
Second, whereas Dorado (2005) proposed three regimes of organizational field
transparency, our emergent findings suggest two additional regimes. Dorado suggests that the
degree of multiplicity and the level of institutionalization of the organizational field determines
an actor’s organizational field transparency to opportunity for institutional change. She argues
that a highly institutional field is opaque to opportunity for institutional change, a moderately
52
institutional field becomes transparent to such opportunity, but that an organizational field
with low levels of institutionalization becomes hazy to such opportunity.
Our case analyses revealed that these three regimes of organizational field transparency
were insufficient to fully explain our observed patterns of opportunity and threat perceptions.
Careful examination of the case data revealed two intermediate states. 13 of our cases were
observed to experience their organizational as semi-opaque. Conversely, 11 of our cases were
observed to experience their organizational field as semi-hazy.
These finer-grained regimes might also be useful for understanding the broader
phenomena of institutional change beyond discontinuous change. In our observations, these
intermediate fields were instrumental for identifying conditions where there was a divergence
between perceptions of threats and opportunities for discontinuous change, and a
corresponding divergence between routine and resource rigidities. For organizations facing
semi-opaque fields, institutionalization was moderate-to-high, as these organizations
experienced a relatively stable organizational field, but displayed limited flexibility to change, as
future actions were predominantly influenced by past experience. Multiplicity was observed to
be moderate-to-low, as although managers had a little exposure to conflicting institutional
referents, these were not sufficient to enable discontinuous innovations. In these cases facing a
rather closed and stable organizational field, managers perceived a strong threat from
discontinuous change, but did not identify clear opportunities to pursue discontinuous change.
Conversely, for organizations facing semi-hazy fields, institutionalization was moderate-tolow, where institutional conditions were quite flexible, but there was also evidence of
53
convergence towards accepted practices, norms and values. Multiplicity was observed to be
moderate-to-high, where managers reported exposure to numerous institutional referents, but
predominantly described confusion rather than exploitable tensions. For these organizations
facing a fairly fluid organizational field, managers could envisage opportunities to pursue
discontinuous change, but did not identify clear opportunities. However, as noted above,
threats from discontinuous change are quite different in character to other forms of
institutional change. Consequently, future research is needed to establish whether these
intermediate regimes of organizational field transparency are relevant for other forms of
institutional change.
Concluding Comments
In conclusion, our investigation of 51 episodic case studies revealed distinct patterns linking
organizational field transparency, managerial perceptions of threats and opportunities for
discontinuous change and consequently routine and resource rigidities. As such, we extend
previous research into institutional theory and discontinuous innovation. In so doing, we show
that organizations which experience their organizational fields as transparent tend to display
managerial sensitivity to both opportunities and threats of discontinuous change that in turn
combine to create the right conditions to overcome both routine and resource rigidities.
It remains an open question whether organizations are able to manipulate their
organizational fields to create “transparent conditions”. In our case investigations, we saw a
few examples that suggested such behavior may be possible. For example, one firm engaged in
a systematic process of idea gathering and evaluation that acted to challenge the status quo
54
and reduce managerial perceptions of institutionalization. Another firm engaged in an active
process to extend their inter-organizational networks and thereby increasing multiplicity. In yet
another firm, our observations revealed that some managers simply became more capable of
dealing with, and assimilating, conflicting and diverse information. As a consequence,
organizational fields that were perceived by managers as semi-hazy at one point in time, were
later perceived as transparent. An organization’s ability to manipulate their manager’s
cognitions of organizational field transparency, and how organizational field transparency might
change over time, remain interesting questions for future enquiry.
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Table 1: Sources of Data
Ref Case Code Name
Sector
1
Traditional AreoTech
Aeronautics & Military Comms
2
Exposed AeroTech
Aeronautics & Military Comms
3
Sense-Making AeroTech
Aeronautics & Military Comms
4
Aware AreoTech
Aeronautics & Military Comms
5
Bound AeroTech
Aeronautics & Military Comms
6
Traditional AreoLever
High-Tech Transfer
7
8
Exposed AreoLever
AreoSoft Sense-Maker
High-Tech Transfer
High-Tech Transfer
9 Aware AreoLever
10 Bound AreoLever
11 XBound AeroSoft
High-Tech Transfer
High-Tech Transfer
Software (primarily aeronautics)
12 Bound AeroSoft
Software (primarily aeronautics)
13 Exposed AeroSoft
Software (primarily aeronautics)
14 Sense-Making AreoLever
Software (primarily aeronautics)
15 Aware AeroSoft
Software (primarily aeronautics)
16
17
18
19
20
21
Plastics Moulding
Plastics Moulding
Plastics Moulding
Plastics Moulding
Plastics Moulding
General Finance
Rigid Plastics
Plastic Threats
Exposed Plastics
Plastic Sense
Clear Plastics
Finance Tomorrow Center
22 Finance Future Center
General Finance
23 Finance Dependent Center
General Finance
24 Forward Finance Efficiency
Primarily Insurance
25 Forward Finance Scared
Primarily Insurance
26 Forward Finance Blinded
Primarily Insurance
27 Deliver Intellect
Finance and IP Consulting
28 Dependent Intellect
Finance and IP Consulting
29 Independent Intellect
Finance and IP Consulting
30
31
32
33
34
35
36
37
Design Consulting
Design Consulting
Design Consulting
Telecoms
Marketing and Media
Design Consulting
Management Consulting
Tech Transfer (from Aero-Space)
DesignOverload
DesignOpp
OpenDesign
MobiComFutures
MediaCo
DesignCo
ChangeMgt
SpaceTech
No. of
Interviews
No. of
persons
interviewed
Workshops
No.
approx.
hours
No. of
persons at
workshops
No. of
site visits
Approx.
hours of
field work
10
6
9
198
83
5
293
10
5
8
176
6
10
261
4
7
6
132
11
3
177
6
6
8
176
4
8
238
2
2
1
2
2
2
1
1
2
1
0
1
0
2
0
0
4
0
6
0
0
3
0
2
0
2
1
2
1
1
8
8
4
13
9
38 ComPrint
Computer Printer Manufacturer
2
1
4
5
2
0
8
39 SemiCon
40 GlobalIT
41 InnoAdvice
Semi-Conductors
Global IT solutions
Specialist Innovation Consultancy
1
8
4
1
4
2
1
8
8
4
64
64
1
6
2
0
4
1
6
116
77
42 KidzStuff
Toys, lights, clocks and dinner ware
for children
IT Support / ICT for Schools / Data
Services
Chartered Accountants and Auditors
1
1
1
5
6
0
7
1
1
1
5
6
0
7
1
1
1
5
6
0
7
1
1
1
5
6
0
7
46 NewMuse
Portable test and measurement
equipment
Music instrument and products
2
1
1
2
3
0
6
47
48
49
50
Nano-technology
Innovation Consulting
Bio-technology
Components for the auto sector
1
1
1
4
1
1
3
1
1
1
0
0
5
5
0
0
6
6
0
0
0
0
0
0
7
7
5
6
Manufacturing Advice and
Subcontracting
TOTALS
2
2
1
4
3
1
11
69
52
63
865
162
39
1,284
43 ComEduData
44 Account
45 Test&Measure
NanoNew
I.Consult
BiotechNew
Nuts&Bolts
51 Manutech
Plus industry monitoring, 298 archival documents and email conversations
61
Table 2: Cross-Case Analysis of Managerial Cognition and Organizational Inertia
Managerial
Cognition
Description
Representative Evidence
Organizational
Inertia
Evidence
Group A
16 cases
No substantial
management
attention paid to
DI.
Rigid Plastics had been recently displaced from one of its
core markets without warning and as the Sales Manager
recalls “we had no other opportunities to speak of really,
other than streamlining for our main customer in the
States”.
13/16 Cases
Investment patterns
continued to be orientated
towards existing productmarkets.
LOW
Threat
Perception
HIGH
Despite the emergence of internet-based competitors, Fast
Routine
Forward Finance remained resolute in their core product: “I
Rigidity
accept that there might be some people who are reckless
enough to put up with a poor product and no service…but
these are not people [customers] we want. As for
generating some returns from our investments, we just
have to educate the customer.” [Marketing Director]
LOW
Opportunity
Perception
Group B
13 cases
HIGH
Threat
Perception
LOW
Opportunity
Perception
HIGH
Resource
Rigidity
Substantial
management
attention to DI
with negative or
loss framing but
no substantial
positive or gain
framing
SemiCon was acutely aware of technological advances from
Taiwanese companies “What delighted the customer
yesterday is expected today, and tomorrow they want it at
half the cost.” but failed to see the potential opportunity
“Let’s be honest, we could have taken Product S2 to Taiwan
at least two years ago, invested to protect the intellectual
property and benefited from significantly lower production
costs for all that time. In short, we were just too scared.
We’re not good at seeing the up-side of big change.”
62
13/13 Cases
LOW
Resource
Rigidity
HIGH
Routine Rigidity
No substantial changes to
traditional routines such as
NPD procedures, inter-firm
or intra-firm collaboration,
new market channels or
suppliers or engagement
with customers.
Substantial investment in
new projects orientated
towards DI.
No substantial changes to
traditional routines such as
NPD procedures, inter-firm
or intra-firm collaboration,
new market channels or
suppliers or engagement
with customers.
Managerial
Cognition
Description
Representative Quotes
Organizational
Inertia
Evidence
Group C
11 cases
Substantial
management
attention to DI
with BOTH
negative or loss
framing and
positive / gain
framing
“We realized a while ago that the sophisticated piece of kit
[Product K1] that we sell to the environmental agencies
could be dumbed-down and used by mechanics. So, we built
a new, simpler device and realized that with a few
improvements it could eventually replace Product K1, so we
set to work. If we don’t do it, someone else will jump on
this.” [Deputy Managing Director].
11/11 Cases
Substantial investment in
new projects orientated
towards DI.
Substantial
management
attention to DI
with positive /
gain framing but
no substantial
negative or loss
framing
Sense-making Aerosoft’s management dismissed the threat
from low-cost alternative technology and were later
displaced in the market for a core product, but
acknowledged many opportunities: “Then we discovered
that our skills would offer them [a new potential customer]
the very solution they needed and at a much lower cost
than they’d ever paid. So, over lunch the other day, I held a
project scoping meeting. Everyone there could see it would
work. It was a no-brainer…..We keep finding these sorts of
opportunities these days.” [Senior Technologist].
11/11 Cases
HIGH
Threat
Perception
HIGH
Opportunity
Perception
Group D
11 cases
LOW
Threat
Perception
HIGH
Opportunity
Perception
63
LOW
Resource
Rigidity
LOW
Routine Rigidity
HIGH
Resource
Rigidity
LOW
Routine Rigidity
Substantial changes to
traditional routines such as
NPD procedures, inter-firm
or intra-firm collaboration,
new market channels or
suppliers or engagement
with customers.
No substantial investment in
new projects orientated
towards DI.
Substantial changes to
traditional routines such as
NPD procedures, inter-firm
or intra-firm collaboration,
new market channels or
suppliers or engagement
with customers.
Table 3: Level of Institutionalization Experienced by Managers: Organizational Field Transparency
Definition
Organizational Field
Transparency
Opaque
(7 cases)
Observations almost
universally conformed to
characteristics of high
institutionalization, and
almost no observations
indicating multiplicity.
Semi-Opaque
(13 cases)
A relatively stable
organizational field but with
limited flexibility to change,
where future action is
predominantly influenced by
past experience. Some
exposure to conflicting
institutional referents, but
not enough to spark tension.
Institutionalization
Actor’s experience of the degree of shared
understanding of accepted rules, practices and beliefs
within the organizational field and level of conformity
regarded as legitimate.
Multiplicity
High
Rigid Plastics was focused on their traditional
institutional environment: “We had bought out
operations and were so focused on maximizing our
links to our mother company”.
Forward Finance Efficiency managers regarded
working within the established institutional
environment of the sector as essential for legitimacy:
“Look, this sector’s focus has not changed for years. If
we started talking to new people, word would get out,
and our credibility might be questioned.” [Customer
Service Director].
Low
Rigid Plastics had no exposure to alternative referents.
As the Director General recalls: “we didn’t really stop
to think about what was going on in the world outside.
Looking back, I guess it was sort of naïve.”
Forward Finance Efficiency Manager’s key focus was
driving efficiency within the business through process
improvements and the application of technology in
what was perceived to be a slow-changing market.
Medium-High
SemiCon viewed their industry environment as
dynamic “Our industry does not stand still for long. …
So we know that we have to stay on top of the latest
developments” [Chief Technology Officer]. However,
they retained traditional views regarding industry
progress.
Bound AeroLever had lost key personal. Its relatively
inexperienced managers accepted industry practices
but were not tightly bound by these norms.
Low-Medium
SemiCon did have some exposure to conflicting
institutional referents: “ we’ve got an established
network to help us with that. It stops us becoming too
fixed on what we do.” but their networks were
constrained to their traditional industry and not
sufficient to spark tension.
Bound AeroLever inexperienced managers had
predominantly narrow exposure confined to the
current industry.
64
Degree of multiple, conflicting institutional referents
experienced by actors across the organizational field.
Transparent
(11 cases)
Substantial convergence
around accepted practice,
norms and values, but
enough flexibility to engage
in change should managers
see fit. Some exposure to
conflicting institutional
referents.
Medium
Text&Measure maintained customer-embedded
business principles: “ my father helped us found our
core principles… basically we focus on what adds value
to the customer… and we outsource everything else”
[Deputy Managing Director]
Clear Plastics while remaining embedded in their
traditional sector and practices, were open to new
ideas. They had instigated a formal ideas management
and portfolio process.
Medium
Text&Measure had an open approach to new
institutional referents: “We network like crazy and
spend a lot of time talking to familiar and unfamiliar
markets. Everyone loves it here. We’re all constantly
learning.” [Deputy Managing Director]
Clear Plastics opened their traditional institutional
boundaries, exploring partnerships to licensing their
technology and act as contract manufacturers.
Semi-Hazy
(11 cases)
Managers reported exposure
to numerous institutional
referents, but described
confusion, rather than
exploitable tensions,
surrounding conflicting
institutional structures.
Hazy
(9 cases)
Managers faced a highly fluid
and flexible environment
with open arrangements.
Low-Medium
Sense-maker AeroSoft was not overtly constrained by
tradition and was pro-actively pursuing new ways of
doing things. Yet this was at the periphery and the
core of the organization retained traditional beliefs.
Medium-High
Sense-maker AeroSoft were exposing themselves to
unfamiliar referents in a controlled manner: “… we’ve
stopped talking about new developments to just
anyone. Now we make sure we talk to the right
people.” [Head of Innovation Team].
Low
Exposed Plastics was under pressure in many of its
traditional product-markets by low-cost technologies.
They saw the industry in a state of flux and did not feel
constrained by traditional models.
DesignOverload was a newly established “innovation”
division given free reign: “we couldn’t quite see what
the division should look like… we’re creating the rules”
High
Executive managers purposefully exposed themselves
to new and unfamiliar institutional referents: “We’ve
been focused on looking around the world for new
opportunities. … We spend more time than ever trying
to make sense of unfamiliar markets.” [General
Manager, Exposed Plastics]. “…we leave no stone
unturned, consequently it can be a knowledge
management nightmare” [Division Director,
DesignOverload]
65
Table 4: Aggregate Pattern of Cases
Organizational Field Transparency
Opaque
Semi-Opaque
Transparent
Semi-Hazy
Hazy
Number of Cases
Threat
Perception
7
13
11
11
9
High
1
13
11
0
0
Low
6
0
0
11
9
High
0
0
11
11
1
Low
7
13
0
0
8
Low
0
12
11
0
0
High
7
1
0
11
9
Low
0
0
11
11
3
High
7
13
0
0
6
Managerial
Cognition
Opportunity
Perception
Resource
Rigidity
Organizational
Inertia
Routine
Rigidity
66
Table 5: Opaque fields and their influence on inertia
Construct
Prevalent
Condition
Prevalent Mechanism
Managerial LOW
Unawareness of potential
perception of 6 / 7 cases discontinuous change or
imminent
resolute belief in status-quo
discontinuous
threats
Exemplar Evidence and Quotes
“We didn’t really stop to think about what was going on in the world outside.
Looking back, I guess it was sort of naïve.” [Managing Director, Rigid Plastics]
“I accept that there are some people (customers) who are reckless enough to put up
with a poor product and no service… but these people are not people (customers) we
want… we just have to educate the customer.” [Marketing Director, Forward Finance
Efficiency]
Managerial LOW
Unawareness of potential
“The key opportunity for growth in our sector is to offer the best possible customer
perception of 7 / 7 cases discontinuous change or
experience, whilst delivering the most efficient service. Everyone here knows that.”
specific
resolute belief in status-quo [Call Center Director, Forward Finance Efficiency].
discontinuous
opportunities
Resource
Rigidities
HIGH
Insufficient motivation to
7 / 7 cases invest
Fast Forward Efficiency’s innovation portfolio continued to exclusively focus on IT
enabled efficiency gains and incremental product refinements.
“Perhaps you’d think that the loss of [Product A] would have made us invest in new
opportunities. But we had no opportunities to speak of really, other than
streamlining for our main customer in the States.” [Sales Manager, Rigid Plastics]
Routine
Rigidities
HIGH
Insufficient motivation to
7 / 7 cases change
“I know the market is now different, but if we’d have stopped for just a minute, and
challenged what else is going on, perhaps we would have been able to change our
business model and still be a player.” [Director General, Rigid Plastics]
67
Table 6: Semi-opaque fields and their influence on inertia
Construct
Prevalent
Condition
Prevalent Mechanism
Exemplar Evidence and Quotes
Managerial HIGH
perception of 13 / 13
imminent
cases
discontinuous
threats
Discontinuous threats are
more visible than
discontinuous opportunities
in a moderately high
institutional environment
SemiCon had until now had maintained a near monopoly for their Product S2.
However, they were acutely aware of the technological advances being made in
Taiwan and the potential threat that this posed to their business.
Aerolever was under threat in several of its major products from competitive
technology advances.
Managerial LOW
perception of 13 / 13
specific
cases
discontinuous
opportunities
Discontinuous threats are
more visible than
discontinuous opportunities
in a moderately high
institutional environment
“Let’s be honest, we could have taken Product S2 to Taiwan at least two years ago,
invested to protect the intellectual property and benefited from significantly lower
production costs for all that time. In short, we were just too scared. We’re not good
at seeing the up-side of big change.” [Marketing Director, SemiCon]
Managerial attention at Aerolever was taken away from disruptive opportunities by
the threats to their primary markets.
Resource
Rigidities
LOW
12 / 13
cases
Imminent threat provides
sufficient motivation to
invest
In a defensive move to catch up to the now advanced Taiwanese competitors
SemiCon had now invested in new manufacturing facilities in Taiwan for Product S2.
They also invested in a discontinuous project S1.
AeroLever shifted its innovation portfolio to projects to “defend” its major markets.
Routine
Rigidities
HIGH
13 / 13
cases
Resort to familiar routines
under threat
“There’s too much resistance to the new technology. I’m just worried about when it
becomes fully feasible and has to come over here (S1 transferred to operations site).”
[Program Manager, SemiCon].
“Whilst we’re trying to support innovation, I think the remaining staff have reverted
to their old types of behavior.” [Operations Director, AeroLever]
68
Table 7: Hazy fields and their influence on inertia
Construct
Prevalent
Condition
Prevalent Mechanism
Exemplar Evidence and Quotes
Managerial LOW
Managerial focus on
perception of 8 / 9 cases sensemaking of
imminent
opportunities diverts
discontinuous
attention from threats
threats
Exposed Plastics while investigating adding functionality to their top-of-the-range
core product (Project A3) ignored clear risks at the bottom of their product range
posed by competing technology of low-cost Chinese manufacturers.
“We’re not seeing the fact that there are other, more strategy based consulting
firms, which could easily take the space that we are trying to move into.” [Project
Manager, Design Overload].
Managerial LOW
Challenge of sensemaking
perception of 8 / 9 cases dilutes attention to specific
specific
opportunities
discontinuous
opportunities
“We spend more time than ever challenging our processes and trying to make sense
of unfamiliar markets. Sure it’s exciting but how do you know where to make the
gamble – risk is a major issue right now.” [General Manager, Exposed Plastics]
“I think it’s because we are trying to manage too much information at once. I’m
certain it’s blinding us.” [Division Director, Design Overload]
Resource
Rigidities
HIGH
Investment caution under
9 / 9 cases uncertainty
Several new technology projects were suspended at Exposed Plastics.
“Despite our best intentions, right now we just have to follow the money… we’ve got
to cut our teeth on some income generation.” [Division Director, Design Overload]
Routine
Rigidities
HIGH
Reliance on established
6 / 9 cases routines under uncertainty
“We’ve all come to this team with prior experiences and ways of doing things.
What’s funny is how everyone of us reverts back to old routines when put under
pressure. In part this is constraining, but in time, we’ll learn from each other and
we’ll develop our own unique way of making sense of what we see. I’m sure we’ll
soon become great change agents.”[Divisional Director, Design Overload]
69
Table 8: Semi-hazy fields and their influence on inertia
Construct
Prevalent
Condition
Prevalent Mechanism
Exemplar Evidence and Quotes
Managerial LOW
perception of 11 / 11
imminent
cases
discontinuous
threats
Managerial focus on
opportunities diverts
attention from threats
AeroSoft Sense-Maker was suffering from diminishing rates of return on two
existing products, despite investing in continuous improvement and innovation.
The innovation team made a case to the executive team to invest in a new offering
at the low end of their market instead, but the executive team remained
unconvinced of their argument to do so. Later that year, a new organization
entered with a product that targeted that low end of the market.
Managerial HIGH
perception of 11 / 11
specific
cases
discontinuous
opportunities
Resolution of sensemaking
towards opportunities
“Then we discovered that our skills would offer them [a potential customer] the
very solution they needed and at a much lower cost…I held a project scoping
meeting….everyone there could see it would work …we keep finding these sorts of
opportunities these days.” [Senior Technologist, Aerosoft Sense-Maker].
Resource
Rigidities
HIGH
11 / 11
cases
Investment caution under
uncertainty
“I just wish that ‘upstairs’ would be more prepared to accept what we say and give
us more resources.” [Head of Innovation Team, AeroSoft Sense-Maker].
“It’s better to invest where you can clearly measure a return on investment with a
recognizable customer base than to probe in the dark.” [Finance executive,
AeroSoft Sense-maker]
Routine
Rigidities
LOW
11 / 11
cases
Small scale or illicit
experimentation
“I’m encouraging my guys to break the rules if they need to. Although I’m still
finding it difficult to get approval for funds, especially for ideas that could
cannibalize our existing business.” [Divisional Innovation Team Head, AeroSoft
Sense-Maker]
70
Table 9: Transparent fields and their influence on inertia
Construct
Prevalent
Condition
Prevalent Mechanism
Exemplar Evidence and Quotes
Managerial HIGH
perception of 11 / 11
imminent
cases
discontinuous
threats
Sufficient openness balanced Test&Measure ?????
with adequate sensemaking Clear Plastics planned to exit the lower and middle tier of a core market, and
refocused on the upper tier and new markets.
Managerial HIGH
perception of 11 / 11
specific
cases
discontinuous
opportunities
Sufficient openness balanced “After I saw this PhD student deliver his presentation, I thought what a great
with adequate sensemaking opportunity!… He now works for us and we share the intellectual property with his
university bosses...Actually, lots of our chaps joined us this way.” [Deputy Managing
Director, Test&Measure].
Clear Plastics implemented a new innovation process that allowed them to refine
the boundaries of their organizational field and clarified opportunities “forced us to
use our knowledge in a more structured way” [R&D Director]
Resource
Rigidities
LOW
11 / 11
cases
Sufficient motivation &
acceptable risk to invest
“We have a cool way of allocating resources. It allows us to radically improve what
we’re already doing and encourages us to explore new ideas at the same time”
[Deputy Managing Director, Test&Measure].
Clear Plastics redirected resources for incremental new product development
projects (in uncompetitive market segments) to a new ideas pipeline.
Routine
Rigidities
LOW
11 / 11
cases
Opportunity clarity induces
change
Test&Measure established new partnerships with Universities and re-conceptualized
their market boundaries to develop products for a new, lower-tier customer type.
“We worked with some new friends [new partners] and developed a more formal,
transparent innovation process that’s inclusive of incremental improvements to our
processes and products, and also supportive to those of us who want to push the
71
boundaries.” [R&D Director, Clear Plastics]
72
Figure 1: An Interpretative Model of Organizational Field Transparency, Managerial Cognition and Organizational Inertia
Opaque
Managerial Experience
of Organizational
Field Transparency
SemiOpaque
Low
High
Managerial
Cognition:
Opportunity
& Threat
Perception
Transparent
SemiHazy
Hazy
Multiplicity
High
Institutionalisation
Low
High
Perception
Limited
Attention
Threat
Sensitivity
Opportunity
Sensitivity
Low
Perception
Opaque
Semi- opaque
Transparent
Semi-hazy
Challenge of
Sensemaking
Hazy
Rigid
Organizational
Inertia:
Resource & Routine
Rigidities
Insufficient
Motivation
Resource
Rigidities
Routine
Rigidities
Uncertainty
Flexible
Opaque
Semi- opaque
Transparent
73
Semi-hazy
Hazy