When Firms Change Direction

When Firms Change Direction

When Firms Change Direction

When Firms Change Direction

Synopsis

Firms within the same competitive environment (industry) respond in different ways to changing environmental (competitive) conditions. The authors of this book argue that the strategy field has not found answers to the questions that flow from this observation. They answer these questions by using what they call a "cognitively anchored theory of strategic change."

Excerpt

This chapter examines how individual inertia and perceptions of stress are affected by group context but can also affect that context. Our basic argument is that organizational subgroups, both formal and informal, tend to support the status quo and strongly suppress individually perceived stress, as long as the group is producing generally satisfactory outcomes for its members. However, conversations about unsatisfactory aspects of the current way of doing things are inevitable to some degree in a changing world. If those who raise such issues find a significant audience, we believe the group is increasingly likely to explore and reframe stressors identified by individuals. The shared (or at least group-informed) ideas that emerge are an important source of strategic change, or lack of change. The outcome of sharing questions about the current way of operating may or may not lead to changes in the triggering individual's assessment, changes in group activities, or impacts on the larger organization. Whatever the outcomes, just considering significant change within a group is of critical importance because conversation about change adds to and alters more widely shared cognitions.

The impact of social and political settings on individual cognition is a largely neglected topic that is just beginning to surface in the strategy literature (cf. Pettigrew, 1991; Eden & Ackermann, 1998), even though Cyert and March (1963) expanded the theory of the firm some time ago by emphasizing the difficulties individuals have in establishing mutually satisficing relationships and the inevitability, once a group with similar interests is formed, that other groups will not share all their priorities.

At the end of the chapter, we pay particular attention to those who attempt to manage social, political, and cognitive processes to achieve desirable group or organization outcomes. Our observations highlight the need to avoid two possible extremes of the changing dynamic we outline in this chapter: undue conservatism in collective interpretation and action on the one hand and overreaction to new events and possible events on the other. Chapter 4 then uses this discussion to develop a more formal model of strategic change as a firm-level phenomenon.

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