Academic journal article Organization Development Journal

Strategic Renewal in Large European Firms: Investigating Viable Trajectories of Change

Academic journal article Organization Development Journal

Strategic Renewal in Large European Firms: Investigating Viable Trajectories of Change

Article excerpt

Abstract

European firms are confronted with major changes in their business environment because of specific European factors, such as the creation of a single European market, and because of global factors, such as the merging of industries. Firms in Europe therefore need to renew to cope with the changing environment. Renewal is presented as resulting from change processes that take place within organizations. Twenty-four ventures in three large European firms were analyzed to see how such dynamic processes lead to strategic renewal. The findings reveal that renewal trajectories depend on the organizational form, the market, and the strategy.

Introduction

European firms are not only confronted with changes in their business environment that occur worldwide, but also with changes that are currently specific for firms in Europe. Authors (D'Aveni, 1994) have noted an increased turbulence in the business environment for reasons such as globalization, diffusion of markets, and developments in information technology (Prahalad and Hamel, 1994). European firms are also faced with the creation of a single European market. This increases competition because national markets are opened up to foreign competition, monopolies ended, and former national companies are privatized. How then do large firms in Europe respond and react to these changes? Firms have a large spectrum of renewal options open to them to create new combinations of resources (Guth and Ginsberg, 1990), ranging from acquisitions to selecting bottom-up initiatives. Despite this vast choice of alternatives it remains unclear under what conditions firms should opt for a certain renewal alternative. We therefore analyzed 24 ventures in three large European firms, KLM Cargo, Ericsson The Netherlands, and Van Ommeren Tank Storage, to see how they deal with the changing environment they are faced with.

Background

Revealing the secrets of strategic renewal has been a quest for many strategy scholars. A basic dilemma these scholars faced is how large firms balance the exploration of new opportunities with the necessary exploitation of their current activities. Strategists have taken different angles in tackling this problem. Of the three key dimensions that we have distinguished some have focussed on organizational forms conducive to renewal (cf. Burns and Stalker, 1961; Miles and Snow, 1986), others have looked at managerial roles (cf. Chandler, 1962; Bower, 1970; Bartlett and Ghoshal, 1993), and then there are those who have focussed on the time dimension (the phases) of the intrapreneurial renewal process (cf. Burgelman, 1983; Van de Ven and Poole, 1988)

The problem with the many attempts that have tried to unravel the mystery of strategic renewal is that most scholars have tended to include only two out of the three dimensions. For example, Burgelman (1983) took both the phases and managerial roles into account, but focused on the diversified firm, thus leaving out variance in the organizational form dimension. Chandler (1962) took the organizational form and managerial role into account, but left out the time dimension. Naturally, these different approaches have lead to different results. The ongoing discussion about whether strategic renewal is better achieved by top-down or bottom-up processes exemplifies this point. Hence, what is needed in our view is an integration of the three: forms conducive to renewal, managerial roles, and the time dimension. In this paper we therefore suggest such integration.

The paper is organized as follows. First we suggest a framework for analyzing strategic renewal. Then we explain the research method we used in analyzing 24 projects in three firms. After showing the results we discuss these and offer new suggestions for theory building.

Framework

The framework we propose is one that combines organizational forms, managerial roles, and the time dimension. It provides a means for a further and deepened understanding of strategic renewal. …

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