Conceptualizing Processes of Strategic Change. The Contribution of an Attention-Based View to Strategy Formulation E-Book

Florian Körner

• Herausgeber: GRIN Verlag
• Sprache: Englisch

Veröffentlichungsjahr: 2015

Beschreibung

Master's Thesis from the year 2015 in the subject Business economics - Business Management, Corporate Governance, grade: 1,7, University of Hannover (Personal und Arbeit), course: International Management, language: English, abstract: How and why do organizations change? These questions have been an enduring and central quest of management scholars and many other disciplines. To find answers concerning these questions, it is indisputable that executives need to develop strategies in order to reach their goals and successfully respond and adapt to the environment while facing ‘change’. Or as Ocasio (1997) put it, “explaining how firms behave is one of the fundamen-tal issues or questions that define the field of strategy (…) and the contribution it makes to the theory and practice of management.” When companies are faced with environmental or internal changes, some organizations start changing their strategies and others do not. Accordingly, in this paper we will view strategic change as the firm’s alignment with its external environment and with internal organizational issues. Hence, the starting point for why organizations take action concerns the environment within which the company operates. Over the past decades, managers and scholars assumed that the environment needed to be assessed, observed and enacted in order to gain information, process this information and to formulate a strategy to reach future goals and push the firm’s overall performance. The most popular assumptions within the strategy formulation literature are that “the appropriateness of a firm’s strategy can be defined in terms of its fit, match, or congruence with the environmental or organizational contingencies facing the firm.” Thus, the environment inhibits global competitive pressure, dynamics and uncertainty because of the current ongo-ing internationalization of firms and their willingness and need to expand and invest in emergent markets in order to survive gain profits. The ongoing revolution and upcoming research stream called Industry 4.0, which is highlighting the importance for and the influ-ence of the internet (e.g. the Internet of Things) on firms, is just one of the examples that shows how firms have to cope with and adapt to the complex environments. Since, for example, the internet improves the information gathering process concerning environmental and internal organizational issues, the actual scarce resource within the firm becomes the managers’ amount of attention that they allocate to “searching for, sorting through, and interpreting the available information.” [...]

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Table of Contents

List of Abbreviations

List of Figures

1. Introduction

2. Literature Review Strategic Management

2.1 Definitions

2.1.1 Definition of Strategic Management

2.1.2 Definition of Strategy

2.1.3 Definition of Strategic Change

2.1.4 Definition of/Differences between Strategic Process and Strategic Content

2.2 Definition of Strategy Formulation and the Concept of Corporate Strategy

2.3 Strategic Choice Under Conditions of Bounded Rationality

2.4 Deliberate and Emergent Strategies

2.5 Consensus in Strategy Formulation

2.6 Issue Selling to Top Management and understanding Strategic Agenda Building

2.7 Preliminary Conclusion

3. The Contribution of the Attention-Based View of the Firm to Strategy Formulation

3.1 Definition of Attention

3.2 The Carnegie School: Assumptions and Theoretical Pillars

3.2.1 Bounded Rationality

3.2.2 Specialized Decision-Making Structures

3.2.3 Conflicting Interests and Cooperation

3.3 The Attention-Based View of the Firm

3.3.1 The Three Principles of the ABV of the Firm

3.3.2 A Model of Situated Attention and Firm Behavior

3.4 An Attention-Based Theory of Strategy Formulation

3.5 Strategic Framework and Specific Research Questions

4. Empiricism

4.1 The Contribution of the Focus of Attention to Strategy Formulation

4.1.1 Cognition, Capabilities, and Incentives: Assessing Firm Response to the Fiber-Optic Revolution (Kaplan 2008)

4.1.2 Cognition and Renewal: Comparing CEO and Organizational Effects on Incumbent Adaptation to Technical Change (Eggers & Kaplan 2009)

4.1.3 Competing for Attention in Knowledge Markets: Electronic Document in a Management Consulting Company (Hansen & Haas 2001)

4.1.4 An Attention-Based View of Service Orientation in the Business Strategy of Manufacturing Companies (Gebauer 2009)

4.1.5 Environmental Context, Managerial Cognition and Strategic Action: An Integrated View (Nadkarni & Barr 2008)

4.2 The Contribution of Situated Attention to Strategy Formulation

4.2.1 Competition and Beyond: Problems and Attention Allocation in the Organizational Rulemaking Process (Sullivan 2010)

4.2.2 Attention Allocation to Multiple Goals: The Case of For-Profit Social Enterprises (Stevens et al. 2014)

4.2.3 Commanding Board of Director Attention: Investigating How Organizational Performance and CEO Duality affect Board Members’ Attention to Monitoring (Tuggle et al. 2010)

4.2.4 International Attention and Multinational Enterprise Performance (Bouquet et al. 2009)

4.3 The Contribution of the Structural Distribution of Attention to Strategy Formulation

4.3.1 How Global Strategies Emerge: An Attention Perspective (Bouquet & Birkinshaw 2011)

4.3.2 Weight Versus Choice: How Foreign Subsidiaries Gain Attention from Corporate Headquarters (Bouquet & Birkinshaw 2008)

4.3.3 The Plurality of Institutional Embeddedness as a Source of Organizational Attention Differences (Hung 2005)

4.3.4 Attention as the Mediator between Top Management Team Characteristics and Strategic Change: The Case of Airline Deregulation (Cho & Hambrick 2006)

4.3.5 Toward a Theory of Intraorganizational Attention Based on Desirability and Feasibility Factors (Baretto & Patient 2013)

4.3.6 Polychronicity in Top Management Teams: The Impact on Strategic ecision Processes and Performance of New Technology Ventures (Souitaris & Maestro 2010)

4.3.7 The Integration Journey: An Attention-Based View of the Merger and Acquisition Integration Process (Yu et al. 2005)

4.3.8 Additional Empirical Studies

5. Discussion (Including Limitations and Implications)

6. Conclusion

References

Appendix

List of Abbreviations

List of Figures

Figure 1: Base disciplines that support strategy content and strategy process research

Figure 2: Andrews’ (1971) Model of strategy formulation and implementation

Figure 3: Hambrick and Mason’s (1984) Model of Strategic Choice Under Conditions of Bounded Rationality

Figure 4: Mintzberg and Waters’s (1985) Types of Strategy

Figure 5: Mintzberg and Waters’s (1985) Model of Strategic Learning

Figure 6: Dess and Origer’s (1987) Process Model of Consensus in Strategy Formulation

Figure 7: Dutton’s (1986) Framework of the elements in the issue context and their effect on agenda building

Figure 8: Ocasio’s (1997) Model of Situated Attention and Firm Behavior

Figure 9: Ocasio and Joseph’s (2005) Attentional Processing in Organizational Channels

Figure 10: Strategic Framework of Selective Organizational Attentional Processing

1. Introduction

How and why do organizations change? These questions have been an enduring and central quest of management scholars and many other disciplines.[1] To find answers concerning these questions, it is indisputable that executives need to develop strategies in order to reach their goals and successfully respond and adapt to the environment while facing ‘change’. Or as Ocasio (1997) put it, “explaining how firms behave is one of the fundamental issues or questions that define the field of strategy (…) and the contribution it makes to the theory and practice of management.”[2] When companies are faced with environmental or internal changes, some organizations start changing their strategies[3] and others do not.[4] Accordingly, in this paper we will view strategic change as the firm’s alignment with its external environment[5] and with internal organizational issues. Hence, the starting point for why organizations take action concerns the environment within which the company operates.

Over the past decades, managers and scholars assumed that the environment needed to be assessed, observed and enacted in order to gain information, process this information and to formulate a strategy to reach future goals and push the firm’s overall performance. The most popular assumptions within the strategy formulation literature are that “the appropriateness of a firm’s strategy can be defined in terms of its fit, match, or congruence with the environmental or organizational contingencies facing the firm.”[6] Thus, the environment inhibits global competitive pressure, dynamics and uncertainty because of the current ongoing internationalization of firms and their willingness and need to expand and invest in emergent markets in order to survive gain profits. The ongoing revolution and upcoming research stream called Industry 4.0, which is highlighting the importance for and the influence of the internet (e.g. the Internet of Things) on firms, is just one of the examples that shows how firms have to cope with and adapt to the complex environments.[7] Since, for example, the internet improves the information gathering process concerning environmental and internal organizational issues, the actual scarce resource within the firm becomes the managers’ amount of attention that they allocate to “searching for, sorting through, and interpreting the available information.”[8] Finally, as Simon (1997) stated, “a wealth of information creates a poverty of attention”[9] and therefore, this paper will mainly focus on and examine the term attention.

The attention construct, being the main focus of this paper, will serve to answer the broad research questions of how firms behave and more specifically, how they determine why and how to respond to or anticipate changes in their environment or internal processes. In particular, I will propose Ocasio’s (1997) attention-based view (ABV) of the firm and investigate its contribution to strategy formulation. In order to answer the broad research question, I will first define the main terms of this paper in chapter two and also give a literature review about the topic of strategic (change) management. Beginning with chapter three, I will add the definition of the term attention, continue with proposing the main assumptions and contributions of the Carnegie School. Thereafter, I will focus on the ABV of the firm only while proposing a detailed introduction of this still underdeveloped theory, especially when it comes to empirical testing and researchers trying to apply Ocasio’s (1997) ABV of the firm in practice. Moreover, I will conclude chapter three with my own developed strategic framework called ‘Selective Organizational Attentional Processing’ and then propose four specific research questions which I will investigate in chapter four. My strategic framework specifically combines and integrates proposed theories from chapter two with the ABV of the firm, serving to investigate the contribution of an ABV to strategy formulation. I will propose 18 empirical studies, 16 of them in detail, in the empiricism chapter four which examines the three core principles of the ABV of the firm – the structural distribution of attention, situated attention and the focus of attention – and show potential impacts on strategy formulation, strategic change, decision making and firm performance. Since the ABV of the firm was first developed in 1997, it can still be treated as an underdeveloped construct in terms of empirical evidence. Furthermore, the ABV of the firm is a very abstract theory which can be applied in different ways depending on the researchers’ subjective interpretations. Nevertheless, this theoretical model opens the ‘black box’ of managers’ attention distribution and allocation and ultimately tries to answer the question of how firms behave. Based on my strategic framework and the paper’s four specific research questions, the results of the empirical studies in chapter four will be discussed and critically reflected in the discussion part (chapter five) of this paper. I will not only discuss each paper’s results, I will also propose their limitations and finally derive implications for managers and future researchers regarding the ABV of the firm of the paper. Also, I will refer the results to my strategic framework and the four specific research questions in order to discuss if the questions have been answered or not. Overall, my motivation and intention for composing this paper is to give detailed insights into the construct of attention and to reveal how essential it is for managers when it comes to decision making and formulating a strategy. In strategic management literature, the question of what decision makers do in order to adapt to changing environments and what they do when it comes to strategy formulation was directed towards the actual contents of strategies. As we will see later on, the focus of this paper will be on the strategic process of how managers allocate their attention towards certain environmental and organizational stimuli and why they attend to them and not to other stimuli. Therefore, the topic of this paper includes different research foci, such as Strategic Management (e.g. Organizational Behavior), Psychology and Sociology which shows the multi-disciplinarity of the ABV of the firm.

After having discussed the major findings of the empirical studies, this paper will conclude with chapter six where I will shortly summarize the paper’s main findings and indicate whether or not the four specific research questions could have been answered. At the end of this paper, an appendix with a summary table will be given to view the main results of each empirical study of chapter four.

2. Literature Review Strategic Management

In this section, I will define the keywords and main terms of the title of my paper – “Conceptualizing Processes of Strategic Change: The Contribution of an Attention-Based View to Strategy Formulation” – in order to avoid any confusion about the meanings. Furthermore, a literature review in the field of strategic (change) management will be given, and the main streams which evolved in the literature over the years will be described in detail. It will provide the reader with an overview, and it will help him or her to understand the main contributions which have been made over the past 70 years. Last but not least, I will narrow down the topic in chapter three and clearly point out why the focus of this paper will be on “the contribution of an attention-based view to strategy formulation”.

2.1 Definitions

In the following, the terms strategic management, strategy, strategic change, and the differences between strategy process/content will be determined and defined.

2.1.1 Definition of Strategic Management

Defining broad terms is always difficult, and this immediately becomes clear when we observe the phrase ‘strategic’. But first of all, what does strategic management actually mean? The review of Nag et al. (2007) focused on a clear definition since the literature lacks a coherent identity.[10] Furthermore, I will adapt the three main definitions by Nag et al. (2007) regarding the term strategic management:

1) “Developing an explanation of firm performance by understanding the roles of external and internal environments, positioning and managing within these environments and relating competencies and advantages to opportunities within external environments.

2) Strategic management is the process of building capabilities that allow a firm to create value for customers, shareholders, and society while operating in competitive markets.

3) The study of decisions and actions taken by top executives/TMTs [Top management teams] for firms to be competitive in the marketplace.”[11]

These three definitions will play an important role in the subsequent sections since they give us a broad overview of the overall topic of this paper.

2.1.2 Definition of Strategy

Since Jemison (1981) argues that contributors to the field of strategic management come from sociology, organizational theory, psychology, social psychology, organizational behavior and political science[12], it is logical that the term strategy will include many different definitions as well. Nevertheless, we start defining strategy with Chandler’s definitions coming from management theory as “ …the determination of the basic long-term goals and objectives of an enterprise, and the adoption of courses of action and the allocation of resources necessary for carrying out these goals.”[13] Mintzberg (1978) adds “that all these definitions treat strategy as (a) explicit, (b) developed consciously and purposefully, and (c) made in advance of the specific decisions to which it applies. In common terminologies, a strategy is a “plan.”[14] Moreover, Quinn (1998) adds the terminology that “a strategy is the pattern or plan that integrates an organization’s major goals, policies and action sequences into a cohesive whole. A well-formulated strategy helps to marshal and allocate an organization’s resources into a unique and viable posture based on its relative internal competencies and shortcomings, anticipated changes in the environment and contingents moves by intelligent opponents.”[15] Especially the last part of this definition will directly lead us to the next defined term: strategic change.

2.1.3 Definition of Strategic Change

In the strategic (change) management literature, confusion about terminologies, particularly regarding the term change, is apparent. Nevertheless, I will try to demonstrate why it is difficult to define these broad terms, and I will also try to make clear distinctions. Quinn et al. (1998) wrote that “Strategy itself is really about continuity, not change: it is concerned with imposing stable patterns of behavior on an organization (…). But to manage strategy is frequently to manage change – to recognize when a shift of a strategic nature is possible, desirable, necessary, and then to act.”[16] This idea of distinguishing the terms strategy and managing strategy (managing change) – which ultimately leads to strategic change – makes sense because it reveals the dynamic nature of the environment. Moreover, another more scientific definition of strategic change might help to understand these various differences. Following Pettigrew (1985), “strategy is realized in practice through consistency in a stream of actions and decisions over time”[17] and concluding that “the actions and decisions in questions are those which revolve around the mobilization of organizational resources to exploit environmental opportunities and/ or defend against threats (…) [then] the strategic change process is defined as the actions and decisions that are executed to realize strategic intentions.”[18] Hereby, strategic intent[ion][19] equals the term strategy formulation – which is the process of corporate executives analyzing the organization and environment to choose the appropriate strategy.[20] Additionally, Agarwal and Helfat (2009) define strategic renewal (could be seen as strategic change) as the “replacement of attributes of an organization that have the potential to substantially affect its long-term prospect.”[21] As demonstrated so far, defining the various keywords related to the title of this paper is complex due to the numerous meanings used within the literature, but it is important to make the differences clear from the beginning. Nonetheless, in this paper strategic change will mainly refer to “non-routine, non-incremental and discontinuous change”[22] which shows the dynamic character of the term.

2.1.4 Definition of/Differences between Strategic Process and Strategic Content

To continue with the definition section, I would like to distinguish the strategy process research from the strategy content research. It is particularly important to do so since the main focus of this paper will be on the strategy process research. To begin, what is a process? A process is “the flow of information through interrelated stages of analysis toward the achievement goals.”[23] In the following, I would like to explain the distinction between process/content research adapted from the paper by Chakravarthy and Doz (1992). I will also apply their overview, which allows the reader to get an idea about the focus of the paper. Therefore, it will help to understand the subsequent theories that will be explained later in the paper.

Strategy content research is about the company’s strategic positions that lead to optimal performance under a dynamic and varying environmental context. In contrast, strategy process research tries to answer the questions of how a firm’s strategic position is influenced by its administrative systems and decision processes. Furthermore, the two streams can be distinguished in three constructs which are (i) focus, (ii) disciplinary basis, and (iii) methodologies.

(i) focus: strategy content research “addresses the scope of the firm (combination of markets in which a firm competes) and the ways of competing within individual markets (business-level, competitive strategies).”[24] Moreover, it investigates the influence of the company’s resources on performance. It does not describe how a firm is able to achieve and maintain such resource positioning and this is where the process research arises.

(ii) disciplinary basis: strategy process research includes a wider range of contributions, and it also includes and accepts bounded rational and as well as extra rational behaviors of organizational actors. Content research only deals with the interface between the firm and its environment, while process research deals with the behavioral interactions of individuals, groups, or units within or between companies. All in all, the strategy process research has a broader disciplinary basis.

(iii) methodologies:to make it short, strategy content research can use secondary published data but for strategy process research the so called ‘black box’ has to be opened which needs a wider range of methods such as questionnaire surveys, field studies, and action research as well as longitudinal studies.[25] To finish this section, the matrix (Figure 1), adapted from Chakravarthy and Doz (1992)[26], will show the clear distinction between strategy content /process research and will also lead to a first broad overview of the focus of this paper. It serves as a starting point for further theories that will be explained in the next chapters.

Figure 1: Base disciplines that support strategy content and strategy process research

2.2 Definition of Strategy Formulation and the Concept of Corporate Strategy

While trying to find a perfect definition for the term strategy formulation, I realized that in order to explain this term it is easiest to refer to Andrew’s concept of corporate strategy. In his eyes, “corporate strategy is the pattern of decisions in a company that determines and reveals its objectives, purposes, or goals, produces the principal policies and plans for achieving those goals, and defines the range of business the company is to pursue, the of economic and human organization it is or intends to be, and the nature of the of the economic and noneconomic contribution it intends to make to its shareholders, employees, customers, and communities.(…)[and] ‘corporate strategy’ usually applies to the whole enterprise,(…).”[27] Moreover, Andrews (1980) views corporate strategy as “an organization process, in many ways inseparable from the structures, behavior, and culture of the company in which it takes place.”[28] His contribution, therefore, is based on this process of corporate strategy where he abstracts two important aspects, strategy formulation and strategy implementation. Adding my own perspective of strategy formulation as simply being the formulation of the firm’s strategy and viewing strategy implementation “in terms of the integrating structure of necessary to realize a given strategy”[29] will serve as a better understanding if we have a look at Andrews’ (1971) model of strategy formulation and implementation (Figure 2)[30].

Figure 2: Andrews’ (1971) Model of strategy formulation and implementation

As we can see, there are different components of strategy formulation which we have to take into consideration in order to formulate the corporate strategy. This ultimately serves as the precondition for successful strategy implementation. Nevertheless, the main focus of this paper is clearly on strategy formulation which will be explained in the following.

Obviously, Andrews (1971) sees strategy formulation as deciding what to do. Identifying opportunities and risks are the preconditions of actual choice or strategy making. What he calls economic strategy stands for the strategic alternative which is the result of matching opportunities and corporate capabilities while adding a certain kind of objectively measured risk. The second step in determining the company’s resources highlights what the company can do regarding ability and power and in contrast to what a company might do in terms of environmental opportunities. Moreover, strategy formulation also depends on personal values; especially worth mentioning are the values and aspirations of the CEO (Chief executive officer) which will highly influence what a company actually wants to do. Finally, adding the forth component of non-economic responsibilities to society includes an ethical aspect which varies a lot over the different industries. Strategists have to fulfill the predominant expectations of the society in order to successfully formulate the corporate strategy which ultimately shows what a company should do. In real life, strategy formulation and implementation are interrelated, but since the focus of this paper is only on the process of strategy formulation as the unit of analysis, I think that Andrews’ (1971) model made the distinction and the relations between the terms very clear.[31] Nevertheless, the term strategy formulation could also be defined – like previously mentioned – as the process of corporate executives analyzing the organization and environment to choose the appropriate strategy.[32]