While the group of studies reviewed in the last section does take a dynamic approach to strategy content, it provides little insight into what patterns o f strategy emerge across an industry over time. This issue is rarely addressed in the strategy literature
and is more commonly associated with research on innovation, institutionalism and contextual ism.
Research on the Adoption of Innovations
Organisational innovation literature is composed of three streams - organisational innovativeness, process theories of innovation and diffusion o f innovations (Wolfe
1994). Each of these streams addresses a different research question.
The organisational innovativeness stream of research attempts to uncover the
determinants o f a firm’s propensity to innovate or adopt an innovation. A wide variety of individual (e g. levels of education) and organisational factors (e g. firm size, slack and structure) are highlighted as influential (Slappendel 1996). The process theory
approach focuses on how innovations emerge and develop within an organisation. Research on the diffusion of innovations takes a higher level view, concentrating on
the spread of an innovation through a population of potential adopters (Wolfe 1994)). The aim is to observe and explain rates and patterns o f innovation adoption over time and space
Potential adopters are assumed to make independent and rational choices to close gaps between the firm’s objectives and its current performance (Abrahamson 1991). With certain knowledge o f the nature of the performance gap and the efficiency o f the innovation, firms with similar goals will act in the same way.
Chapter 2 - Toward a Dynamic View o f the Content o f Strategy
Based on this efficiency choice view (Abrahamson 1991), four models o f innovation diffusion are described in the innovation literature (Tidd et al 1997). The Epidemic
and Bass models assume that innovations spread as potential adopters become aware
of their advantages Adopters are seen as being homogeneous The rate of diffusion will vary between innovations and will be a function of the number o f firms that have already adopted and the number of potential adopters remaining.
The Probit model of diffusion rejects the assumption of firm homogeneity, suggesting
that potential adopters have different thresholds to adoption Organisational attributes, such as firm size, determine the height of threshold levels Bayesian models o f
diffusion reject the notion of perfect information implicit in the other three models Potential adopters hold different levels of knowledge about an innovation and it is lack of information that acts as a restraint on innovation adoption
Each of these models describes a skewed ‘S-shaped’ curve as the basic pattern of innovation diffusion through a group of companies over time (Jensen 1988, Nabseth and Ray 1974). However, there are many exceptions to this S-shaped model of innovation diffusion, and researchers have yet to understand when, and why it can be applied (Wolfe 1994).
The positioning o f a firm on the diffusion curve indicates its tendency to adopt the innovation, with descriptions ranging from early adopter to late adopter or laggard being applied
The diffusion of innovations, based on the Epidemic and Bass models, has attracted considerable attention from marketing researchers (Rogers 1983, Lieberman and Montgomery 1998). In particular, there is interest in the issue of when to launch new products and the relationship between entry order and performance. Order entry is widely linked to firm performance, with first movers gaining long term competitive advantage (Kerin et al 1992). However, long term advantage only materialises if firms are able to exploit their early moves (ibid)
Equating innovations to new strategy initiatives suggests that strategies will diffuse through an industry. The rate of such diffusion will depend on the nature o f the strategy and/or a number of organisational and individual attributes The speed with which firms adopt new strategies will influence their performance (Lieberman and Montgomery 1988 and 1998).
Diffusion models o f innovation have their detractors Pettigrew et al (1992) and Tidd et al (1997) argue that diffusion models tend to assume that the benefits and methods of implementing the innovation are clear and non-contentious. While such situations may occur with technical innovations, in the majority of cases of strategy innovations the pay off matrix is unlikely to be so clear cut (see Spender 1993). Increasing levels of uncertainty will emphasise the effect o f institutional influences (DiMaggio and Powell 1983 and Abrahamson 1991).
Chapter 2 - Toward a Dynamic View o f the Content o f Strategy
Institutional Perspective
Institutionalism provides a less rational picture of diffusion, emphasising the role of mimetic behaviour (DiMaggio and Powell 1983). This perspective allows initiatives, which are not driven by necessity or obvious advantage, to diffuse through an industry group. Firms’ tendencies towards social conformity lead to homogeneity o f their activities (Oliver 1997).
Institutional theory is usually used to explain similarity and stability of firms within a population (Greenwood and Hinings 1996). Indeed, institutional pressures act to prevent change and the adoption of innovations. However, such pressures can also be used to explain the pattern of diffusion of a new innovation or strategy across an industry.
Each organisation will assess the potential returns a new innovation will yield (Abrahamson and Rosenkopf 1993). This assessment will be influenced by the degree to which the firm is subject to institutional pressures The less institutionally bound firms will be more likely to adopt innovations Adoption by one firm will influence the adoption decision o f others, leading them also to adopt (ibid) As more firms adopt the new approach it becomes increasingly institutionalised and pressures on others to follow suit grow.
Hence, a new innovation will diffuse through an industry over time. The rate of diffusion will depend on the extent to which early adopters influence other firms (i.e. are opinion leaders) and secondly the strength of institutional pressures
At its core, the institutional perspective suggests a model o f adoption that is socially deterministic However, recent literature in this area has begun to recognise a role for managerial action. Oliver (1991) suggests a number of strategies that management can pursue in relation to institutional pressures Greenwood and Hinings (1996) argue that in addition to the dynamics o f the dominant coalition, the adopting organisation must also possess a capacity to implement the change This growing view suggests a role for both management agency and structuralism, a duality that is at the heart of the work of Giddens (1979) and of contextualism (Pettigrew 1990)
Contextual Perspective
The focus of the contextualists is on the interplay between internal and external factors on the birth, evolution and development of strategies within firms (Pettigrew 1992, see also McKelvey 1997) Managers are seen as being capable of mobilising aspects of the inner and outer context in order to reconfigure the pattern of attachment to different strategic alternatives.
Strategies will be adopted as a result of key individuals recognising opportunities or threats in the firm’s environment and convincing others in the controlling dominant coalition of the accuracy of their interpretation and the appropriateness o f the proposed response. Implementation o f the strategy will depend upon the ability of the dominant coalition to mobilise the required resources.
Chapter 2 - Toward a Dynamic View o f the Content o f Strategy
The ability of the firm to adopt a new strategy will be influenced by the internal and external context of the firm, and the quality o f attributes such as leadership skills and human resources (Pettigrew and Whipp 1991). In the event o f a change in the environment, the organisation that first perceives and interprets this change and mobilises the appropriate resource will be the quickest to respond. Such resources may be o f many kinds e g financial, political, or ideological (ibid).
Comparison of Alternative Perspectives
These three alternative streams o f literature all provide a dynamic view o f the organisation Application to strategy implies that strategy initiatives will diffuse through an industry forming patterns o f emergence and development over time Within an industry, firms will vary in the speed with which they adopt a new strategy
While the notion of early and late adopters is well developed in innovation and marketing research, it has seldom been addressed in relation to strategy. Lieberman and Montgomery (1998) have recently suggested that the field of strategy would benefit from adopting the findings of marketing research on first mover advantage In particular, they highlight research relating order o f entry to market share and firm performance. However, Lieberman and Montgomery (1998) argue that there is little understanding o f the market and firm level determinants o f entry order.
The alternative perspectives reviewed here address this apparent weakness, although offering contrasting explanations as to why a firm may be an early or late adopter
The three streams o f innovation literature taken together suggest that the speed at which a firm will adopt an innovation will be determined by the nature of the innovation, attributes of the organisation (e g. size and structure) and characteristics of individual managers (e g. levels o f education) The institutional view suggests that the speed at which a firm will adopt an innovation is determined by the degree to which the firm is influenced by pressures to conform to industry norms Finally, the contextual perspective, while recognising the role of internal and external contextual influences, promotes the importance of management ability to recognise environmental change and mobilise an appropriate response