Organizational Practices

The concept of practices overlaps substantially within the literature with the

concept of routines1. While the former has been derived from institutional theory

(DiMaggio and Powell, 1983; Meyer and Rowan, 1977; Zucker, 1991), hence emphasizing the influential role of social forces in creating homogeneity and stability, the latter is rooted in the evolutionary theory of the firm (Nelson and Winter, 1982), thereby emphasizing change. While there is not complete agreement upon the definition of routines in existing literature, there is some consistency with respect to their characteristics, namely that they consist of patterns of organizational behaviour which are repeated, involve collective action, are process-oriented in nature, and are developed through path dependent, context specific learning processes (c.f. Becker, 2004).

Following institutional theorists (Meyer & Rowan, 1977; Selznick, 1957; Zucker, 1991), Kostova and Roth (2002, p.216) define organizational practices as: “an organization‟s routine use of knowledge for conducting a particular function that has evolved over time under the influence of the organization‟s history, people, interests, and actions” (see also Kogut and Zander, 1992; Kostova, 1999; Szulanski, 1996). Practices, therefore, embody organizational knowledge regarding the way things are done within a particular organization, and the actions required for performing them. Consistent with the objectives of this research, innovation practices are considered a subset of organizational

1

According to the Concise Oxford English Dictionary (2006), „routine‟ is defined as “a sequence of actions regularly followed; a fixed unvarying programme” and „practice‟ is defined as “the customary or expected procedure or way of doing something”. The latter definition is consistent with the importance of the formal and normative nature of practices, and the social influences on them, as discussed in this thesis.

practices which focus on novelty generation. While not necessarily using the term practice explicitly, there are precursors in the literature which appear to refer to the same general concept. In a discussion on the components of technology transfer, for example, Zander and Kogut (1995, p. 77) highlight the prerequisite of “organizational principles by which individual skill and competence are gained and used, and by which work among people is organized and coordinated.” This characterization of organizational principles is highly consistent with the definition of practices used here, and highlights the need for the pre-existence of something identifiable in order to transfer new knowledge and capabilities.

Despite these different points of emphasis, the literature on both routines and practices does not, in sum, deny the existence of both change and stability in either. Both are processes, embody a set of guidelines or rules for how specific activities are conducted (i.e. organizational knowledge), and are open to adaptation based on feedback provided from use (Becker, 2004; Kostova, 1999; Kostova and Roth, 2002; Nelson and Winter, 1982; Teece and Pisano, 1994). In essence, the terms are nearly identical in ontological content but arrived at through different epistemological vantages. Thus, in order to facilitate a discussion on practice transfer, adaptation and evolution, it is assumed that both routines and practices are subject to the same influences with largely the same effect, albeit with slight differences in extent. As detailed in the next subsection, practices are less specific than routines with regard to functions, are more frequently repeated in the organization, and are more resistant to change.

Practices are institutionalized and thus relatively homogenous within a particular grouping (e.g. an organizational subunit) while routines are emergent from groups, and can potentially be heterogeneous across the organization. While Kostova (1999) does not specifically include any discussion on the extent of diffusion, her focus on „strategic‟ practices implies that it is limited to the organization. Her later work with Roth focuses exclusively on the transfer of quality management practices of a single organization to subsidiaries in ten countries. These researchers suggested that the regulatory, cognitive, and normative institutional environments (Scott, 1995) of different subsidiary locales would impact the adoption and internalization of quality management practices.

This manner of observing practice transfer creates some ambiguity as to the exact nature of practices. That is, if a practice is specific to an organization, or in this case segment of an organization, some aspects of the external institutional environment of the subsidiary should not be applicable. Rather than subsidiary employees being intimately familiar with the practices to be transferred, as represented by the cognitive pillar of institutional theory, they would at best be familiar with the practice in name only, suggesting that to be recognizable, a practice must be of the „management fashion‟ persuasion (Abrahamson, 1991). Since this does not fit the espoused definition of practice, it is important to keep in mind that deep familiarity with practices is achieved through interaction with them only, a perspective which is presented in more detail in a subsequent discussion on communities of practice. Practices can also diffuse beyond the boundaries of a single organizational unit, such as when geographically dispersed

individuals within a MNE pursue new opportunities together (Lee and Williams; 2007). However, their exact form will depend upon implementation, which is influenced by history, location and relational context (Barney 1991; Simon, 1991; Dyer and Singh, 1998).

In summary, routines emerge from communities, and may become institutionalized at the organizational level, at which point they are referred to as practices. For example, a community of software developers may devise routines to hasten the completion of their work by dividing it amongst themselves and engaging customers more frequently. These routines can become further integrated with a firm‟s overall capabilities and established at the organizational level, perhaps through managerial intervention, and thus come to represent a common practice used throughout the MNE. This is not to say that everyone in the organization is a participant in a certain practice. Instead, the practice is engaged in by everyone attempting to accomplish similar functions.

A practice becomes more identifiable, but less consistent, when it is institutionalized beyond the context of a single organization, to whole industries. Hence, routines form the building blocks for practices under institutionalization pressures, while practices are the building blocks of capabilities, which in turn directly address the value creation proposition of the firm. As routines represent more generalized functions within the organization, it is their combinations which form the unique practices and capabilities

of the firm. In the final subsection, routines, practices, capabilities and knowledge are related in order to construct a view of the firm consistent with KBT.