Equifinality

In addition to the proposed empirical test for complementarity mentioned earlier, in order to support the validity of the configuration-performance relationship still further, I will also argue for the existence of equifinality, an implicit assumption of both Miles and Snow’s (1978) and Porter’s (1980) typologies (Marlin, Ketchen & Lamont, 2007).

Equifinality in organization theory refers to the circumstance that organizational performance can be achieved through multiple different organizational structures or strategies, even though the contingent factors faced by organizations may be the same; that is, the equifinal state can be reached independent of the initial condition (Tushman & Nadler, 1978; Scott, 1981; Van de Ven & Drazin, 1985; Hrebiniak & Joyce, 1985; Nadler & Tushman, 1988; Pennings, 1992; Galunic & Eisenhardt, 1994; Gresov & Drazin, 1997). Gresov and Drazin (1997) propose that equifinality occurs when different structures yield the same (or equivalent) functions and that performance is a consequence of organizational design, which is derived from managers’ ability to make strategic choices according to their perceived environmental situation and their firm’s resource flexibility.

They also argue that configurational equifinality is a situation in which an organization faces multiple, conflicting sets of functional demands and has many structural alternatives available to satisfy those demands. Thus, the organization faces a trade-off between structures and functions. The key success factor is internal consistency and coherence of organizational structure choices. Since an organization cannot satisfy different functional demands along a continuum between a pair of structural choices, its performance depends on proximity to feasible ideal patterns (Doty, Glick & Huber, 1993). This condition appears to be consistent with Porter’s (1980) contention that commitment to at least one of three generic strategies (overall cost leadership, differentiation and focus) will result in higher performance than failure to develop a generic strategy, when a firm becomes stuck in the middle. Likewise, it conforms to Miles and Snow’s (1978) assertion that the three viable strategy types (prospectors, defenders and analyzers) are equally likely to perform well as

71 they respond to the challenges of organizational adaptation in a consistent fashion. Conversely, reactors, which respond uncertainly or inappropriately to environmental functional demands, are generally linked with poor performance. Note, however, that there are only a handful of empirical researches regarding equifinality in organizational configuration (Doty, Glick & Huber, 1993; Gresov & Drazin, 1997) because of the lack of proper research method that allows a holistic examination of all possible combinations to test this notion up until recently. This methodological gap will be discussed in detail in Section 5.2 of Chapter 5 (page107).

Since equifinality is a condition that supports the configuration concept, proving the existence of equifinality of the different typologies studied will bolster the validity of configuration; if equifinality exists, then an implicit assumption of configuration is empirically supported. In other words, the claim of equivocality in prior researches is essentially a normal characteristic of equifinality and these assertions, therefore, cannot falsify the configuration-performance relationship. Hence, I seek to provide evidence of equifinality by arguing that diverse organizational configuration typologies chosen from a firm’s range of available structural options perform equally well in terms of the overall performance proxy.

3.2.1

Equifinality of GOC and FC (H4)

Building on the complementarity hypothesis (H3), which proposes that various consistent combinations of GOC and FC are anticipated to be sufficient conditions for their relevant performance dimensions, I also argue that the success of each consistent combination in each performance dimension is comparable in terms of the overall performance proxy. In other words, complementarity exhibits equifinality. For example, while differentiated defenders with RD may be able to charge a higher margin (gaining output efficiency) for their well-designed or innovative products, they cannot sell them in large numbers because of their comparatively high price and the fact that they must maintain their unique status; hence, they cannot gain economies of scale and tend to have low input efficiency.

72 On the other hand, despite the lower margin, low-cost defenders, using their OP, may still enjoy a larger sales volume and benefit from lower operating costs (input efficiency) owing to scale and scope economies as well as the learning curve provided by their rigorous operations process.

Alternatively, by aiming both to lower operational costs and provide a differentiated product commanding a high price, best cost defenders, deploying both OP and RD, may face the problem of balancing these two objectives, for example difficulty in designing an organizational structure both to support creativity in their product design (decentralized) and to routinize processes to control costs (centralized), and thus may be unable to outperform the advantageous performance measures (input and output efficiency) of the previous two typologies. However, they may still outperform them in their disadvantageous performance measures, resulting in performance parity between them.

Prospectors will gain first mover advantage by using their MKT and striving for excellence in adaptability (AD) to tap new market opportunities quickly and flexibly via their close customer connections. However, the benefits may fade sooner than expected owing to the entry of followers – copycats who save on the expense of researching the market, introducing a new product and educating a new market by exploiting the first mover’s activities.

Again, in business units that operate in both existing and new markets by using their close market monitoring, quick management decision-making, and strong sales and distribution (SD) functions to respond quickly and flexibly to continuous change in the market, analyzers, with their MIS and SD capabilities, may gain high sales growth and market share (effectiveness) while still facing the problem of balancing objectives, hence achieving low input and output efficiency.

Each typology appears to offer both competitive advantages and limitations. The various typologies may be viable business models and may be equally successful in the same

73 environment. I propose that no single typology outperforms the others in general (except the reactor which, as mentioned earlier, is not addressed in this research), given that all respond to the challenges of organizational adaptation in a consistent fashion. In other words, these typologies are expected to achieve a similar overall performance proxy (OA). In effect, this shows the existence of equifinality.

The reason for using an OA in examining equifinality is that different performance dimensions cannot be directly compared because they span different units. Moreover, a number of empirical studies in this research stream (e.g. Schoeffler, Buzzell & Heany, 1974; Buzzell, Gale & Sultan, 1975; Rumelt & Wensley, 1981; Phillips, Chang & Buzzell, 1983; Prescott, Kohli & Venkatraman, 1986) support the use of OAs since they show a positive and often significant effect of market performance on profitability.13

Consequently, by arguing for the implications of the OA arising from consistency between GOC and FC, the following main hypothesis is proposed:

H4: Being part of a firm that has a high intensity level of at least one type of proposed FC and having a high intensity level of a particular typology of proposed GOC that is compatible with its firm’s FC is a sufficient combination of conditions for a business unit to achieve a high level of overall performance proxy.

To test this hypothesis, in Section 4.4 of Chapter 4 (page 99) four sub-hypotheses are developed to investigate what combination of proposed type of FC and proposed typology of GOC is sufficient to generate a high OA. I hope to observe similar combinations to those of H3, supporting the hypothesis that each matching combination performs equally well in terms of OA as a result of complimentarity.

13

Market performance in this case refers to sales growth and market share, which is the proposed effectiveness measure in this research. Profitability refers to the proposed OA in this research.

74 In addition, one assumption of the equifinality hypothesis (business units perform equally well through different strategic paths) is that business units’ accomplishments in relevant performance dimensions are components of OA. In other words, each performance dimension and OA are intermediate and final outcomes, respectively, of complementarity between GOC and FC. Consequently, this assumption leads to another way to test for equifinality in this research (sub-hypothesis H4e), which will be discussed in more detail in Section 4.4 of Chapter 4 (page 99).

3.3

Chapter summary

In this chapter, I have reviewed the relevant literature arguing for the performance implications of complementarity between GOC and FC and equifinality between matching combinations. Building on a clear description of the four main research hypotheses in the current and previous chapters, in the next chapter I will then argue for a more specific relationship of each performance dimension under each main hypothesis, resulting in four sub-hypotheses for each.

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