Organisational Change and Performance:
The Effect of Inertia, Extent of Niche Expansion and Organisational Characteristics

Abstract

Organisational change is one of the most popular and interesting topics in business, among both academics and practitioners. However, from previous research development in organisational change, the limiting conditions that apply to the two competing paradigms call for more empirical investigations in different organisational contexts (Aldrich, 1979). Enough research has been conducted on organisational change to make it clear that both content and process dimensions of change should be evaluated, and their separate effects need to be distinguished (Barnett and Carroll, 1995). The previous theories and analyses often tend to only one dimension. Furthermore, previous researchers comment that the dynamic effect of change has been ignored in recent tests of structural inertia theory (Delacroix and Swaminathan, 1991; Haveman, 1992; Kelly and Amburgey, 1991). Very few empirical studies seek to link change action to organisational performance, and the destabilizing effects of change have been assumed more than tested in the previous organisational research studies (Barnett and Carroll, 1995, Carroll and Hannan, 2000).

This thesis is one of the first studies to investigate the effects of both organisational change content and organisational change process outside Western countries. It seeks to escape from the binary distinction of adaption versus selection embraced by opposing theoretical camps, and looks for a more balanced stance. Drawing on the literature on organisational change in organisational ecology and associates the claims of managerial scholars, considers the above research suggestions, it directly examines the broader implications of inertia theory and recent developments in niche expansion theory relating with the measurement to dynamic performance consequences of organisational change. It integrates a number of important theoretical variables to address a variety of distinct theory fragments. These include expectation of firms’ on the survival threshold of change, regression toward the mean, time variance of the change effect, cascading change and the effect of organisational characteristics of opacity, asperity, intricacy and viscosity (Hannan, Polos and Carroll, 2007). It separately examines the effect of the change process on performance (Barrett and Carroll, 1995), empirically tests the effects of organisational characteristics on the change length and on the change process. Both the lack of studies outside Western countries and the lack of studies on the process of organisational change make this study a path-finding study.

This thesis is applied to a case organisation in the safety and filtration industry in China. It aims to test the generalizability of organisational change theories in this specific context and the predictability of change theories. In order to achieve these aims, this thesis adopts an in-depth qualitative research strategy and a detailed operational design. The qualitative methods it used were interviews, observation and documentation. The findings were consistent with the theoretical predications. There was a positive relationship between the experience of previous change types and the likelihood to adopt the same type of change in the future. It also demonstrated that there was a significant relationship between the extent of niche expansion and the change effect on performance. The more extensive the organisational change, the more unrelated the niche expansion move, and the more organisational performance is likely to be negative. The results also gave support to the predication of this study that the instant effects of organisational changes were harmful, but declined over time; organisational change might improve performance in the long run in the context of environmental transformation in the safety and filtration industry of China. However, the role of the pre-change condition to initiation change and the relations of the pre-change condition and change consequences were not obviously observed from the results of the empirical data collected in this study, the measurement model was re-estimated and further study to verify the results was suggested. Moreover, the organisational characteristics of intricacy, viscosity, opacity and asperity extended the length of the organisational change process, and the length of the change process negatively affected performance. However, the result showed that opacity not only led to an under-estimation of the change length but also an over-estimation. It only happened in the change cases in which a similar type of change was previously implemented and the managers had relevant change experience with that change type. In order to demonstrate that the theories from the adaptation and selection camps are not mutually exclusively, this study examined the possibility of ambidexterity which is in the centre of the organisational adaptation camp (O’Reilly and Tushman, 2008). The results showed that a limited number of change cases conditionally supported the proposition’s predication in this study: it was possible to simultaneously achieve flexibility and efficiency in the organisational change process, with the condition that only if a similar type of change was implemented previously and the managers had previous experience.

Finally, this thesis proposed that the theories of organisational adaptation and selection were complementary; some effects of change processes were interpreted better by one view than the other, and it suggested a possible way of disentangling the propositions to directly examine the elements influencing the change process and the consequences on performance functions by considering both theories. The findings of this paper have strong implications for future research into organisational change studies by several dimensions, and they shed light on several important practical issues in business.