An Empirical Analysis of Organizational Transformation Capability in Thai Electrical and Electronic Businesses: How Does It Influence Sustained Competitive Advantage?

Pongklee, Anirut, Ussahawanitchakit, Phapruke, International Journal of Strategic Management

1. INTRODUCTION

The worldwide effect of technological evaluation, deregulation, globalization, and market liberalization is restructuring markets and challenging traditional approaches to obtaining competitive advantage (Montealegre, 2002). As trade barriers continue to fall and as technology erodes the constraints of physical geography, companies in Western Europe face increasing levels of competition, especially from emerging markets, and a common response has uses business transformation to cut costs using outsourcing, increase economies of scale using mergers and acquisitions and improve the efficiency of business processes using major IT implementations. Consequently, the successful business in a more complex and competitive world inclines to be one that systematically planned for the future. In response to environmental volatility and changes, there has been meaningful occurrence in formal strategic-making systems and in the development of organizational capabilities to support those systems. These capabilities are essence in the ability of organizations to reconfigure and recombine organizational resource (Bhatt, 2000).

A prevailing paradigm for understanding how and why firms gain and sustain competitive advantage is the resource-based view of the firm. This perspective emphasizes performance differences are based on firm heterogeneity. Firms vary in their unique bundles of resource and in the capabilities derive from those resources. Resources that are valuable, unique and difficult to imitate can provide the competitive advantage. In turn, these competitive advantages allow firms to yielding economic rent (Barny, 1991). However, the global competitive battles which firm face the impact of environmental vitality and unpredicted changing environment. Resource-based views of the firm (RBV) have demonstrated the need for an expanded paradigm to understand how competitive advantage is achieved (Teece, Pisano and Shuen, 1997). Recently, the RBV has begun to consider dynamic routines and processes, which are linked to the dynamic capabilities research literature (Eisenhardt and Martin, 2000; Teece, Pisano and Shuen, 1997). This theory can improve our understanding of how firms match their dynamic capabilities to changing environments (Wang and Barney, 2006). Dynamic capability requires the capacity to extract economic benefits from current resources and to develop new capability. Hence, this paradigm focuses on explaining how capabilities having been evolved over time and how firms renew and adapt capabilities (Lavie, 2006). This research emphasizes a component concerning the sequencing of dynamic capabilities during periods of substantial environmental change which pertains to the organization's competencies to integrate, build, and reconfigure resource positions in rapidly changing environments. Apart from that, firm must be developing the organization transformational capabilities because of these competencies are time for coherence and a time for change. In turn, this helps to support firm performance.

The changing environment phenomenon has been studied over the past decade. Most research emphasized on organizational change (Fang et al. 2008; Judge and Elenkov, 2005; Markus and Robey, 1988) which related to organization development theme. However, the organizational transformation capabilities are parts of organizational change of research theme. This construct does not involve in the ability to modify existing capabilities. As a result, these abilities reflect organizational competencies to new and innovative forms of competitive advantage despite constraints of path dependencies and previous market position (Gruca and Nath, 1994). However, there has been little prior investigation in the organization transformational capabilities which most research on organizational transformation has focused on context, process, and typology of transformation (Bechky, 2003; Brynjolfsson and Hitt, 2000; Philip and McKeown, 2004; Rosenbloom, 2000). Then, past research has emphasized on qualitative technique more than qualitative research. Besides, most researches focus on the way and form of business transformation and pay less attention on competency of transformation.

However, prior research has indicated the absence of empirical study. This paper directly addresses this important knowledge gap by advancing and testing the notion of organizational transformation capability. The capability of organizational transformation can enrich empirical study of incumbent response to technology change (Garud and Nayyar, 1994; Lavie, 2006). Thus, the population of this paper can be creating the research contribution. Also, this paper addresses the notion that successful business depends not merely on its existing resources but also on its ability to deploy and upgrade critical capabilities. It has theoretical contribution that encompasses to test the dynamic capability and adds up the literature of organizational transformation capability in term of practitioner's intent.

The objective of this paper is three folds. The first is to empirically examine the consequences of organizational transformation capability on strategic platform uniqueness, capable resource establishment, and swirl innovative knowledge and the moderating effect of technological dynamism on the relationship between organizational transformation capability and its consequences. The second is to examine the outcomes of strategic platform uniqueness, capable resource establishment, and swirl innovative knowledge on sustained competitive advantage. The last is to empirically investigate the role of environmental scanning, customer need uncertainty, and diversified markets and services on organizational transformation capability and the moderating role of economic change on the relationship between environmental scanning, customer need uncertainty, and diversified markets and services on organizational transformation capability.

The focus of this paper is on empirically investigation of why organizational transformation capabilities affect firm's competitive advantage. This research attempts to address specific research question are as follows: (a) how does organizational transformation capability affect strategic platform uniqueness, capable resource establishment, and swirl innovative knowledge?; (b) how do strategic platform uniqueness, capable resource establishment, and swirl innovative knowledge affect sustained competitive advantage?; and (c) how do environmental scanning, customer need uncertainty, and diversified markets and services affect organizational transformation capability?

The remaining part of this paper is structured as follows. First, the relevant literature on all construct is reviewed. Second, the research method of the paper is described. Third, the results of the empirical study are discussed. Finally, the paper ends with theoretical and managerial contributions, suggestions for future research and conclusion.

2. LITERATURE REVIEW

The research model underlying the study is presented in Figure 1. This paper attempts to conceptually organizational transformation capabilities to a firm's sustained competitive advantage. The research model of this paper, the organizational transformation capability, is an independent variable that affects strategic platform uniqueness, capable resource establishment, and swirl innovative knowledge which link to firm's sustained competitive advantage. Then, this paper investigates technological dynamism as the moderator of the effect of organizational transformation capability on strategic platform uniqueness, capable resource establishment, and swirl innovative knowledge. Also, the key antecedents include three factors of environmental scanning, customer need uncertainty, and diversified markets and services. In addition, the paper investigates economic change as the moderator of the effect of environmental scanning, customer need uncertainty, and diversified markets and services on organizational transformation capability.

[FIGURE 1 OMITTED]

2.1 Organizational Transformation Capability (OTC)

Organizational transformation capability can be defines as ability to sense the need to align resources, culture, process, and technology to achieve new forms of competitiveness. It is firm capacity that contributes competitive advantage in dynamic business competition. The notion of organizational transformation capability derives from dynamic capability paradigm. Dynamic capability can be defined as the firm's ability to integrate, build, and reconfigure internal and external competences to address rapidly changing environment (Teece, Pisano and Shuen, 1997). It requires the capability to extract economic benefits from current resources and to develop new capabilities. According to this perspective, a firm's competitive advantage is seen as resting on distinctive processes (ways of coordinating and combining) shaped by the firm's (specific) asset positions (such as the firm's portfolio of difficult-to-trade knowledge assets and complementary assets), and the evolution path(s) it has adopted or inherited. It emphasizes the capability to coordinate, combine, and reconfigure the resources and assets as well as developing new resources and assets to generate competitive advantage, leading to the firm's path dependences and market positions. Thus, notion of transformational concept was similarly to organizational reconfiguration concept. Reconfiguration refers to the ability to sense the need to reorganize the firm's asset structure, and accomplish the necessary internal and external transformation (Zhan and Luo, (2008).

Generally, an organizational transformation is related to organization development theme. The field of organization development is primarily designed to help organizations remain viable and continue to survive in a world of change (Cummings and Huse, 1989). Organization development, as defined by Bennis (1969), is a response to change, a complex educational strategy intended to change the beliefs, attitudes, values and structure of organizations and organizational members so that they can better adapt to new environments. In fact, organizational transformation is advancement over organization development because it focuses on an organization's beliefs, values, and mission (Lau, 1993). Organizational transformation focuses more on the macro aspects of an organization than conventional organization development approaches. It represents a reaffirmation of the system-wide change focus, and the goal is the creation of adaptive, flexible human systems capable of repeated second-order transformations (Woodman, 1989). It concerns the organization's capability to learn and be ready for future changes (Porras and Silvers, 1991).

In applying organizational transformation to the mind sets of related environmental change, the objective is to transform the firm to build up a longer-term collaborative culture (Lau, 1993). Managers, at both corporate and divisional levels, must learn to develop a supportive climate, ready to share resources with other divisions. A corporate profit versuses divisional profit mentality needs to be built up. The emphasis in transformation is on the thinking and perspectives of people involved. Stockport (2000) coined the conceptual framework of strategic transformation. This construct similarly related notion of organizational transformation capability. Strategic transformation is defined as the ability of an organization to transform itself to ensure long-term survival. This argument suggests the following …

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Publication information: Article title: An Empirical Analysis of Organizational Transformation Capability in Thai Electrical and Electronic Businesses: How Does It Influence Sustained Competitive Advantage?. Contributors: Pongklee, Anirut - Author, Ussahawanitchakit, Phapruke - Author. Journal title: International Journal of Strategic Management. Volume: 10. Issue: 1 Publication date: February 2010. Page number: 49+. © 2008 International Academy of Business and Economics. COPYRIGHT 2010 Gale Group.

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