Exploring organizational agility

144 Pages·2010·1.49 MB·English

Master’s Thesis Human Resource Studies
School of Social and Behavioral Sciences, Tilburg University

Exploring organizational agility:

A qualitative case study on organizational knowledge creation as a determinant
of organizational agility while considering the impact of institutional
mechanisms

Student: L.M.A.W. Janssen
Anr: s275445
Telephone: [phone]

Supervisors: drs. M.C.P. Nijssen & prof. dr. J. Paauwe
Theme: Organizational agility in an institutional context
Date: December 9th, 2010
Table of Contents

Table of Contents .................................................................................................................................... 2
Abstract .................................................................................................................................................. 4
1. Introduction ....................................................................................................................................... 5
Problem statement .............................................................................................................................. 9
2. Theoretical framework ..................................................................................................................... 10
Dynamic environment ................................................................................................................... 10
Organizational agility ..................................................................................................................... 11
Organizational Knowledge Creation ............................................................................................... 14
Operationalization of the organizational knowledge creation practices .......................................... 18
Institutional mechanisms ............................................................................................................... 24
Heuristic framework ...................................................................................................................... 28
Propositions .................................................................................................................................. 29
3. Methods ........................................................................................................................................... 33
Research set-up ................................................................................................................................. 33
Sampling strategy .............................................................................................................................. 36
Data collection .................................................................................................................................. 45
Data analysis ..................................................................................................................................... 47
4. Findings ............................................................................................................................................ 49
5. Conclusion & Discussion ................................................................................................................... 52
Conclusion ......................................................................................................................................... 52
Discussion ......................................................................................................................................... 54
First central research question ....................................................................................................... 54
Second central research question .................................................................................................. 64
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Emerging findings (not directly linked to a proposition) ................................................................. 71
Hypotheses .................................................................................................................................... 74
Reflection on the theoretical and heuristic framework used .......................................................... 76
6. Limitations and directions for future research .................................................................................. 80
7. Implications for practice ................................................................................................................... 87
Appendix .............................................................................................................................................. 89
I. Case study protocol ................................................................................................................... 89
II. Topic list .................................................................................................................................... 90
III. Cross-case analysis: The process in detail ............................................................................... 94
IV. Table 7 ................................................................................................................................... 95
V. Findings ..................................................................................................................................... 96
Proposition 1 ................................................................................................................................. 96
Proposition 2 ............................................................................................................................... 103
Proposition 3a ............................................................................................................................. 107
Proposition 3b ............................................................................................................................. 117
No findings .................................................................................................................................. 119
Emerging findings which are not directly linked to a proposition .................................................. 121
VI. Institutional mechanisms influencing the predictability of the income ................................. 128
VII. Table 9 ................................................................................................................................. 129
VIII. Table 10 ............................................................................................................................... 132
IX. Table 11 ............................................................................................................................... 134
X. Table 12 ................................................................................................................................... 135
References .......................................................................................................................................... 137

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Abstract

A multiple case study design is used to explore which organizational knowledge creation (OKC) practices
are present in agile firms, how these might relate to organizational agility, and how organizational
responses to institutional pressures influences OKC and organizational agility. Data was collected via
semi-structured interviews with 30 key informants and via document analyses. The data was analyzed
via systematic coding and cross-case analysis. Overall, the OKC process of the firms in this study appears
to focus strongly on stimulating new knowledge creation via stimulating interpersonal relations between
employees internally, and between employees and people external to the organization. In line with this,
the organizations displayed a strong preference for, and use of, informal knowledge processing (using
interpersonal interaction) over formal knowledge processing (using documents and databases). The
findings show that the influence of the institutional mechanisms on the implementation of the OKC
process depends on the response chosen by the organization to these pressures. Various other findings
are presented and discussed as well. Based on the findings, this paper offers inspiring ideas for
practitioners, as well as tentative hypotheses which can serve as input for future research in the
paradigm of organizational agility.
Keywords: agility, organizational knowledge creation, institutional mechanisms

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1. Introduction

Imagine what it would be like when half of the cells of your nervous system would not function anymore.
The number of sensory neurons sending signals to your brain drops severely, making you less sensitive
to the state of your body and the world around you. Furthermore, you have less functioning brain cells,
making you less able to process the input from the sensory cells. As a result, the speed and quality of
your reaction to internal and external changes decreases. Now imagine that body being an organization.
Just like a body, an organization tries to inform itself about, and to react to, its internal state as well as
to its external environment in the best possible way. To survive and thrive in a dynamic environment it is
crucial that organizations are able to adapt themselves to, and to prosper in ever changing
circumstances. This can be done by being sensitive to changes outside and inside the organization and
by acting on it both effectively and efficiently. Via groups of employees, new knowledge is created.
Constantly creating new knowledge is very important. Without this, an organization’s knowledge
reservoir (the totality of knowledge an organization can draw upon) would rapidly become outdated,
leaving the firm ill-equipped to actively shape, or even to keep up with the changes in their environment.
While one might be able to suffice with only half of the sensory and brain cells in rather stable and
predictable environments, dealing with dynamic environments (rather turbulent environments in which
there is relatively much unpredictable change impacting the firm) might ask for all the sensory cells and
the brain cells to be active in collecting information in order have a higher chance to pick up the
important clues the environment offer. This information is then send to the brain, where it can be given
meaning and placed in a context, making it knowledge. An organization can strive to do this by
stimulating its employees to function as a sensor and as a knowledge creator (brain cell). To do so, the
firm would need to employ specific knowledge creation practices aimed at stimulating organizational
knowledge creation (a process in which knowledge gets out of an individuals’ head, is discussed by a
group of people who assign meaning to it, and is shared further throughout the firm (e.g. Nonaka,
1994)). The firm needs to get personal, individual information and knowledge out of someone’s head
and into the organization, where it can be shared with others and further processed throughout the
organization. The organizational knowledge creation (OKC) process will be operationalized in this paper
using the SECI cycle by Nonaka (e.g. 1994) as a starting point. This cycle consists of four phases which
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can be seen as four clusters of OKC practices. The SECI cycle and its phases will be elaborately discussed
in the next section of this paper.
Agility & Knowledge creation
There is still no one widely accepted definition of organizational agility (Bottani, 2009; Yusuf et al, 1999).
Most accepted definitions include that it is an organizational ability to react quickly and effectively to an
environment which can change radically –i.e. a dynamic environment- (Bottani, 2009; Boxall & Purcell,
2008). Although the concept is still rather new and little research exists on exactly what practices need
to be adopted to enhance organizational agility, the concept of organizational agility is advocated as a
fundamental characteristic for businesses to survive and thrive in a dynamic environment (Bottani, 2009;
Dyer & Shafer, as cited in Boxall & Purcell, 2008, p. 247-249; Nijssen & Paauwe, 2010).
One of the key factors which are mentioned in the literature as important for achieving organizational
agility is organizational knowledge creation (e.g. Dyer & Erickssen, 2006; Dyer & Schafer, 2003; Huang,
2009; Nijssen & Paauwe, 2010; Nonaka, 1994; Teece et al., 1997). Organizational knowledge creation is
also mentioned as crucial to other agility-related concepts such as the organizational capacity for
adaptation (Hurley & Hult, 1998) and resilience (Lengnick-Hall, Beck & Lengnick-Hall, 2010). These
findings from academic literature are in line with the current view held by many researchers that the
capability to create and apply new knowledge is one of the main sources of competitive advantage
(Huang, 2009; Martin-de-Castro, Lopez-Saez, Navas-Lopez, 2008).
Environmental dynamism & Institutional context
In this paper, an environment is considered dynamic when changes occur which have an impact, which
are hard to predict and which occur frequently (Ansoff & Sullivan, 1993; Dess & Beard, 1984; Jurkovich,
1974; Miles, Snow & Pfeffer, 1974). The dynamics in an environment, as well as the behavior of
organizations, is influenced by changes resulting from both market pressures and institutional pressures
(DiMaggio & Powell, 1983; Greenwood & Hinings, 1996; Paauwe, 2004). The focus of this study is on
dynamic environments. All four organizations in this research are selected based on the fact that they
operate in –and have survived for some time in- a dynamic environment. These four firms are selected
from two industries: one with relatively high degree of institutional pressures where dynamics is caused
mainly by the institutional setting, and one with a relatively low degree of institutionalization where
dynamics is caused mainly by the business environment, i.e. market pressures.
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A sector can be highly institutionalized with many rules, regulations and strong norms from society, or it
can have a low degree of institutionalization. In order to survive in their external environment
organizations have to respond in some way to institutional pressures. An organization can respond to
various institutional pressures by complying, defying or coming up with an innovative response where
the firm actively leads, initiates or develops changes in the institutional mechanisms which often benefit
both themselves and other parties (Paauwe, 2004). This response to institutional pressures will be
taken into account in this research, when analyzing how firms’ response to them influences the
implementation of their OKC practices.
Role of HR
The role for HR in knowledge management and agility has been stressed in the academic HR literature
(see e.g. Boxall & Purcell, 2008; Dyer & Shafer, as cited in Boxall & Purcell, 2008, p. 247-249; Yorks,
2005). One of HR’s generally accepted tasks involves the development of the employees, or human
capital, of the organization. Within the field of HRM, there is even a specific sub-field for research on
human resource development (HRD). In the HR and HRD field, the literature often states that HR
professionals must introduce practices to stimulate, guide and harvest learning, to translate it, and to
diffuse the learning throughout the organization (e.g. Yorks, 2005). In the Strategic HRM literature (e.g.
see Paauwe, 2004), HR’s involvement in knowledge management and organizational agility is often
focused around the ‘strategic partner’ and/or ‘change agent’ HR roles, made famous by Ulrich (1997). In
these roles, HRM takes a future and strategic focus, contributing to both people and process matters. In
line with the change agent role, HR is often associated with the role of stimulating an organizational
culture of organizational learning (Yorks, 2005).
Employee development can build employee potential and the firm’s agility over the long run (Dyer &
Shafer, as cited in Boxall & Purcell, 2008, p. 247-249). Dyer and Shafer (as cited in Boxall & Purcell, 2008,
p. 247-249) were one of the first to really connect agility and HRM. They developed a model of how HR
strategy might support organizational agility, based on exploratory case studies. Desirable HR practices
include for instance flexible work design, continuous feedback and a focus on technical competence,
company values and –strongly related to the focus on this paper- continuous learning. However, their
work is tentative and exploratory, and they stress the need for more research on the concept of agility
and the HR practices that might support it.
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This paper responds to their call, and engages in further exploration of the organizational knowledge
creation (OKC) practices employed by firms who have survived, and are surviving, in dynamic
environments. This is done with the goal to gain more insight into, and to formulate plausible
argumentation on how OKC processes might relate to organizational agility. The tentative outcomes
from this research can inform HR practitioners on how they can contribute to the process of OKC in
relation to the agility of the organization.
Overview of the paper
Chapter one introduces the concepts and states the problem statement of this research, which includes
the two central research questions. Chapter two then goes in-depth and covers the theory from various
fields of literature. Organizational agility, environmental dynamism and institutional pressures are
discussed, and the organizational knowledge creation practices are operationalized. To give direction to
the research efforts, a heuristic framework is shown, and various propositions are formulated based on
the relevant academic literature. Chapter three discusses the methodological aspects of this study,
including the research set-up, the sampling strategy and the data collection and analysis. The findings
are presented in Appendix V; Chapter four only gives a brief summary of these findings. Chapter five
entails the conclusions and discussions section. The conclusion part will focus on the degree to which
the findings were in line with the expectations as posed in the propositions. The discussion part will
elaborate on the findings and the conclusions; it will discuss whether the outcomes of this study can be
explained with logical reasoning and it discusses the findings in relation to the relevant literature.
Possible explanations for the (lack of) findings, as well as possible alternative explanations and critical
notes are given. Chapter six elaborates on the limitations of this research and gives directions for future
research. Chapter seven shows the implications of this research for practice. This paper ends with an
appendix and a reference list.

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Problem statement

The focus of our research efforts will be based on the problem statement and the intent of this paper
(Swanborn, 2003). This paper is aimed at academic theory development. The goal of this explorative
research is to get more insight into the way in which organizational knowledge creation practices relate
to organizational agility, in the context of high or low degrees of institutional pressure the organizations
experience from the environment. This paper has the objective to contribute to further theory
development in the rather new research area of agility, and organizational knowledge creation in a
dynamic context. More specific, the paper strives to formulate plausible hypotheses which could be
tested in future research. This research can also inform practice, since it helps organizations -and HR
practitioners in specific- to become more knowledgeable with regard to managing OKC processes, so
that they might improve the agility and chance of survival the organization has in a dynamic
environment.
The two central research questions this papers hopes to answer =
- What organizational knowledge creation practices are present in agile organizations?
- In what way do institutional mechanisms facilitate or hinder organizational knowledge
creation practices present in agile organizations?
These central questions lead to a number of more concrete, sub questions:
1. Which OKC practices are used by firms operating in a dynamic environment?
2. Which similarities and differences can be found regarding the OKC practices used by firms
operating in a dynamic environment?
3. How does the use of OKC practices employed by the more agile firms in dynamic environments
relate to the SECI theory?
4. In what way do institutional mechanisms and the organization’s response to them facilitate or
hinder the implementation of the organizational knowledge creation practices related to
competencies that make up organizational agility?
The first two research questions are descriptive, and aimed at exploring what practices are found in the
organizations in our study. The two remaining questions are more explanatory. Both the cases and
academic literature provide input for the latter two research questions. This input has enabled the
formulation of a number of propositions, which will be discussed in the theoretical framework.
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2. Theoretical framework
Dynamic environment

There is a vast number and range of external influences from the environment which affect the
organization. The environment will be defined in this paper as an organizational field, which refers to
“those organizations that, in the aggregate, constitute a recognized area of institutional life: key
suppliers, resource and product consumers, regulatory agencies and other organizations that produce
similar products and services” (DiMaggio & Powell, 1983, p. 148).
In order to determine whether organizations survive in a dynamic environment, the level of dynamics in
the environment must be conceptualized. Dynamics in an environment is caused by changes resulting
from both market pressures and institutional pressures. When considering previous literature which
defined environmentalism (Ansoff & Sullivan, 1993; Dess & Beard, 1984; Jurkovich, 1974; Miles, Snow &
Pfeffer, 1974), it appears that dynamics is concerned with all changes regardless of the source, which
have an impact, which are hard to predict and which occur with a certain frequency. Considering the
discussion of Duncan (1972) regarding the operationalization of uncertainty this paper chooses to focus
on perceived uncertainty in the definition of environmental dynamism. This paper acknowledges the
important role of perceptual measures; it believes that when actors perceive their environment as
dynamic, they will act upon this accordingly and they will choose practices in line with that belief.
This leads us to the following conceptualization of environmental dynamism: the degree of change that
is hard to predict, with a high rate of change and with significant impact that heightens perceived
uncertainty for key organizational members.

Dynamic capabilities
Since this research focuses on studying how firms can survive in a dynamic environment, the stream of
research called the ‘dynamic capabilities research’ is relevant. Dynamic capabilities refer to the ability to
respond reactively or proactively to various demands from changing environments (Volberda, 1998).
Since the dynamic capability research is a rather new research domain, which is still in its infancy (Helfat
& Peteraf, 2009), this paper decides to choose one of the definitions of dynamic capabilities which fits
this research best. Following the definition of Teece et al. (1997), dynamic capabilities reflect the “ability
to integrate, build and reconfigure internal and external competences to address rapidly changing
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