Strategy Making, Organizational Learning and Performance in SMEs Author: Edward Gonsalves Open University Business School & Visiting Lecturer, European Business School The theoretical role of organizational learning in entrepreneurship strategy has been largely limited to in-depth case analysis both empirically and as method.
Such developments reflect the diverse nature of entrepreneurial phenomena, definitional controversy over what constitutes entrepreneurship, the emergence of entrepreneurship as a semi-autonomous discipline within contemporary organizational inquiry and the competing demands of managerial, educational and industrial-policy interests. Secondly, learning approaches to entrepreneurial theory have in the main confined themselves to cognitive and experiential perspectives of knowledge as a source of value-creation.
Nevertheless there is a growing consensus that frameworks, which seek to examine the role of organizational learning within entrepreneurship strategy research, are necessary. Mintzberg & Waters’ (1985) work on deliberate and emergent strategy formation is one of the central pieces of literature in what has been described as the ‘process’ school of strategy. This paper adopts a process-based approach when examining entrepreneurship strategies.
It elaborates a typology of strategy formation processes based on Mintzberg’s (1988) definition of strategy as a pattern in a stream of actions. The survey-based research reported is derived from a UK project (Gray & Gonsalves, 2002), and builds on the Mintzberg & Waters’ postulate that ‘emergent strategies imply learning that works’ to hypothesise a relationship between senior managers’ orientations to organizational learning, strategy making and environmental uncertainty.
The paper cons iders the methodological debate within entrepreneurial studies by attending to the structure-agency debate as duality rather than dualism. The paper also argues that a multidimensional approach to theorising organizational learning will provide a more robust basis from which to deliver both diagnostic and normative models of learning within the field of entrepreneurship. It explicates the methodological, and definitional dynamic inherent in moving from verbal conceptualisations of a theory to the corresponding empirical investigation of that theory’s central tenets.
In doing so the author attempts to fill some of the methodological gaps promulgated by theorists in each of the research domains considered. The empirical model integrates a ‘configuration’ perspective of firm strategy, which seeks to establish building blocks for theory construction. Configuration theories constitute a widespread body of literature on the tendency of organisational variable relationships towards ‘ideal’ types.
The assumption is that active searches for new ways of operationalising concepts lead to better correspondence between theory and measures, and that non-standard operationalisations of variables allow for relationship verification and external validity despite substantial methodological variation. Keywords: Entrepreneurship, Organizational Learning, Resource-View, Strategic Modes 1: Introduction SME researchers are increasingly attending to the potential for the organizational learning concept to contribute to an understanding of entrepreneurship and entrepreneurial success.
In developed market economies the antecedents for this growth in research are increasingly driven by two factors. Firstly the increasing emphasis at policy level on the need to promote entrepreneurial activity through education initiatives (Rae & Carswell, 2001), and secondly, the increasing willingness by large firms and development agencies to participate in the establishment of entrepreneurial cultures within their networks of SME suppliers and customers (Gray, 1998).
Most of these reports readily admit that researching the process of organizational learning within entrepreneurial, small and medium-size enterprises (SMEs) remains long-term and problematic (Gray & Gonsalves, 2002), however, an emerging consensus argues that further empirical study into these processes will help delineate & develop the concept of entrepreneurial learning.
This paper attempts an integration of theoretical perspectives when hypothesising relationships between the constructs of SME strategy- making (Mintzberg 1978; Mintzberg & Waters 1985, Hart 1995), organizational learning (Crossan, Easterby-Smith), environmental uncertainty and performance in developing such a concept. The empirical description adopts a survey-based approach to theory testing and uses SME managers’ perceptions of their firms’ characteristics and competitive environments.
Firstly, it adapts a process-based approach to describing the hypothesised relationships. The assumption is that a ‘meta-theoretic’ and integrative perspective enables researchers to conduct enquiries into SMEs that are at once consistent with previous researches in the field and sympathetic to conceptualising learning and strategy making as multi-dimensional and temporal phenomena.
We acknowledge therefore that the managers’ responses to the survey questionnaire are a ‘snap-shot’ of SMEs, which encompass the time-sensitive, ‘…codification of events in memory that bring to the present, and projected futures, impressions of the importance, duration, frequency and interdependencies that combine to produce the experience…’ of organization. (Cairns et al, 2003: 129) As Kor & Mahoney (2000) note, in Penrosean approaches ‘ The entrepreneurial imagination is influenced by experiences of interactions between managers and resources.
Thus the firm is both pushed and pulled by the future. ’ (p. 115) Secondly, such an approach supports arguments in which actors’ understandings of organizational phenomena, as reflected in their perceptions, may provide insights into organizational processes which are as valuable as studies into ‘objective’ strategic phenomena (Fombrun & Zajac, 1987; Hooley et al. , 1997). 2 Finally, the survey-based approach is consistent with previous, albeit not solely SME-based, studies into the relationship between strategy making, competitive environments and firm performance. Miller & Friesen, 1983; Mallory et al. , 1997). These assumptions have guided the study’s dynamic when facing the methodological, and definitional difficulties inherent in moving from verbal conceptualisations of a theory to the corresponding empirical investigation of that theory’s central tenets (Venkatraman, 1989). In doing so we attempt to fill some of the methodological gaps promulgated by theorists in each of the research domains considered.
In particular this makes explicit the research reality when working with the organizational learning construct, which in terms of empirical validation studies remains dispersed (Lahteenmaki et al. 2001) and the strategy- making construct which although more developed continues to demand ‘accuracy and parsimony’ (Miller, 1983:772) when adapting Mintzberg’s (1973) strategy- making & Mintzberg & Waters (1985) deliberate-emergent typology to a survey-based study. 2: Theory & Proposition Review 2. 1: SME Theory
Knowledge about SME management is fragmented (d’Amboise & Muldowney, 1988). Robinson and Pearce (1984) note that ‘the state of knowledge pertinent to the strategic management of SMEs is woefully inadequate. Most literature in this area is prescriptive, lacking a rigorous empirical base’. These gaps are attributable to the considerable methodological and theoretical volatility facing researchers in the field (Mc. Kiernan & Morris, 1993) (Curran et al. 1992) and the theoretical limitations of ambiguous definitions of strategy, in much SME management literature.
The difficulty in conceptualising leads to difficulties in operationalising constructs for SMEs. Gibb and Scott (1985) draw attention to the confusion ‘What for example is the difference between a plan, a strategic plan, or for that matter just a simple strategy? ‘ The question not only highlights the definitional confusion in the field, but is also witness to an overwhelming concern of analysing small business strategies as plans. Strategic planning taken to be a proxy measure of, and in many instances an alternative to strategic management (Pleitner, 1989).
It is not the purpose of this paper to consider arguments for and against the relative merits of prescribing strategic planning as an indispensable necessity for SME management. Instead we argue that all firms are engaged in ‘strategic thinking’, but not all have ‘intended’ strategies, that is to say strategic plans. SME research, especially at the conceptual level will need to draw on developments in strategic theory if it is to adopt this broader and differentiated perspective of strategy ‘making/forming’.
That smaller organisations tend to have implicit, intuitively derived strategies (Scott, 1971; Mintzberg, 1973) makes the distinction all the more important. 3 2. 2: RBV of Strategy Strategy- making and organizational learning are conceived in this study as potentially firmspecific endowments, a perspective which draws on the resource-based theory of the firm (Penrose, 1959; Wernerfelt, 1984) in which firms are perceived as bundles of differential resources replenished, diminished and sustained by managers as they exercise dynamic choices in their ongoing search for economic rents (Barney, 1991).
The resource-based view (RBV) accords greater weight to the positive role of entrepreneurial managerial discernment in explaining the sustainable competitive advantage of firms when compared to the emphasis placed on managers by traditional theories of industrial organization and strategic planning. Hart (1995) notes that: ‘The strategic significance of firm resources and capabilities has been heightened by recent observations that companies that are better able to understand, nurture, and leverage core competencies outperform those that are preoccupied with more conventional approaches to [strategic] business planning… (p. 989) Conner’s (1991) critique compares and contrasts the RBV to previous macro and microeconomic schools of thought. For example, within the Schumpetarian proposition she contends ‘…firms exist primarily to seize competitive opportunity…in order to make rival positions obsolete…and that the purpose of the firms seeking radical innovation is tied to the possession of [a will to] monopoly power [thereby securing above normal returns in the long term]…’(p. 27) From the Chicago school’s perspective firms exist not to obtain monopolistic positions through destruction of competitors, but to grow through the exploitation of competitive efficiency differentials in production and distribution. Hence, firm growth, size and scope are functions of this ability and the achievement of scale economies, rather than industry structure (Conner 1991). In contrast to the above two perspectives Conner (1991:130) argues that transaction cost economic theorists (Williamson 1975) view the firm as an internally collusive entity legitimized into existence to save on costs attributable to that of market exchanges.
That is, by ‘…Forming an organization and allowing some authority (entrepreneur) to direct its resources, certain marketing costs are saved and thus firms exist to avoid [economise on] the costs of conducting the same exchange between autonomous market contractors…they exist to avoid the costs of the market’s pricing mechanism…’(p131) Whilst acknowledging the relationship of the RBV to the above perspectives, as possible theories of the firm, Conner (1991) suggests that the former requires research efforts to pay increasing theoretical attention to managers’ discernment in enabling heir firms to generate rents as seekers of unique or otherwise costly-to-copy inputs. Importantly, insufficient 4 attention has been paid to the ‘entrepreneurial vision, intuition and the creative act underlying such visions’ Conner (1991:133-134). Conner (1991) argues strongly that from the resource-based perspective, reasons for firms’ (notably the joint-stock company’s) existence need not necessarily be explained as ‘avoiders of the negative’, but rather cumulative ‘creators o a positive’, independent of states of f opportunism.
The RBV therefore offers a theory of the firm’s existence which ‘…turns on the advantages (over the market contract) in inter-component knowledge transplantation and creation-redeployment of specific assets…’ (p. 141) In keeping with previous strategic management literature, the RBV places considerable emphasis on the role of underlying intrafirm- level, activity-based value linkedness /relatedness (Rumelt, 1974; Markides & Williamson, 1996; Mallory et al. , 1997) to account for the [potentially conscious or unconscious] existence of gains.
Lastly, Conner (1991:144) notes that the impacts resource-based studies of the firm will have on the field of strategic- management depends largely on the nature of how it is operationalised. Of the four issues she highlights, two are pertinent to this research project. Firstly, the search for explanations of differential firm returns needs to focus on differential inputs and capabilities, rather than similarities. The following section, which considers the role of management as a critical firm resource, attends to this possibility.
Secondly, there needs to be a distinction made between resources at stock & flow levels. We return to this issue later as we review and draw upon research (Crosaan et al. 1993-2001), which explicitly recognises such a distinction when proposing organizational learning processes as one of a firm’s core capabilities (Prahalad & Hamel, 1990). We surmise the above in: Proposition1: The RBV of sustainable competitive advantage provides a sufficient and positive theoretical explanation of the firm within which to empirically study strategic management. . 2. 1: The senior manager as entrepreneurial resource The RBV also explicates the need to consider management resources as part of the portfolio of strategically relevant resources with which firms are dynamically able to generate rents (Barney, 1991). In particular, the contribution of entrepreneurial acts of value linkedness, in achieving abovenormal returns, relies on management’s distinct abilities to ‘…make sense of their firms’ stock of assets and manage the process by which resources are used and renewed…’ (Mahoney, 1995:92) 5
Castanias & Helfat (1991) argue that whilst much positivist agency literature about the management-ownership control split focuses on the plausible negative effects of managers acting in conflict with the interests of owners, the resource-based view is able to make the case for considering the mediating role of managerial rent collection methods in securing sustainable competitive advantage. For example, they highlight the case of Merck’s then CEO in developing and deploying an academically re-orientated R capability as a probable antecedent to Merck achieving above average returns on equity. Castanias & Helfat 1991: 158 & 161) By integrating deductive economic reasoning with a greater emphasis on the primary role of top managers, they suggest that regardless of whether managerial skills are innate or learned, a ‘congruent’ model of managers’ and owners’ interests allows the possibility of a managerial rents framework which aligns the two. They do not offer a collusive agency argument for the firm’s existence, instead they suggest that one which encapsulates a mutual interests assumption may be allowed in developing RBV frameworks, and this needn’t violate the assumption of utility maximization.
Quoting Donaldson (1990), they note the similarity between their perspective and that of stewardship theory whereby ‘…managers are team players, and the optimal structure is one that authorises them to act, given that they will act in the best interest of owners’ (p. 377) Whilst acknowledging the potential for conflicts of interest to subsume the economic assumption of utility maximization by both parties the managerial rents framework provides a positive theory of management action when explaining possible sources of sustainable competitive advantage.
Building on the notion of the entrepreneurial manager as a firm resource, Mahoney (1995) argues that the resource-based view of the firm, grounded in Edith Penrose’s inductive and deductive methodological approach, is also a learning theory of the firm. In doing so he espouses the need to develop studies, which combine perspectives from the domains of resource-based economic theory, strategic management dynamics and organizational learning.
Specifically, he proposes a resource-learning theory framework, which, drawing on Spender’s (1992) idea of firm-specific knowledge suggests that differential, intra- firm learning configurations may offer a ‘meta-competence’ explanation of how firms generate sustainable rents: ‘… the management team may be rare in terms of firm-specific knowledge of individual managers as well as knowledge embedded in the team. Relatedly, the accumulation of firm specific knowledge may lead to imperfectly, imitable advantages for firms that have assembled competent management teams….
Other managers and management teams will simply lack the knowledge of the particular circumstances and unique historical context in which actions need to be interpreted. ’ (p. 92) Although the nature of the research design reported here makes a path-dependency approach to study organizational learning within the RBV framework impossible, we concur with the above arguments in 6 Proposition 2: The RBV of the firm posits a positive role for entrepreneurial management action posits the possibility of viewing organizational learning processes as firm specific, differential resources. 2. 3: Organizational Learning
The need for congruent and integrative studies across the domains has existed implicitly in the strategic management domain with Shrivastava (1983,1985, 1986), Fiol & Lyles (1985) and March (1991) recognising the salient link that exists between learning processes within organizations and the predicaments of firm survival and growth. Mahoney’s (1995) call for further integration between the fields of strategic management and organizational learning provides explicit encourageme nt for organizational scientists to adopt cross-disciplinarian views in developing exploratory empirical studies.
The following section describes one of the few research streams which attempts a conceptualisation of the organizational learning process as both resource stocks and flows (Direickx & Cool, 1989: 1506) and therefore offers researchers the opportunity to examine the proposed association between strategic management and organizational learning that is, consistent with the underlying Resource-based view of the firm. 2. 3. : Multi -dimensional approaches to Organizational Learning The ‘Learning Organization’ literatures tend towards over-prescriptive idealization of the ‘learning’ in organizations. In other words, learning and change by and far in these literatures is a given ‘good’ with little critique made of potential undesirable consequences of the implemented change programmes, upon which much of this work relies (Argyris & Schon, 1996). We concur with Crossan & Hulland (1997) in their rejection of the Learning Organization approach.
Crossan et al. ’s (1993-2001) accumulated treatise on organizational learning and improvisation represents a coherent programme of study, which enables researchers to design cross-sectional and empirical studies when testing normative claims made about the contribution of learning processes to firm success. Over the past decade, the disparate literatures on the subject have led to a plethora of definitional and theoretical suggestions, with little by way of empirical and measurement validation (Lahteenmaki et al. 001; Easterby-Smith, 1997). Crossan et al. ’s (1995) case-based, inductively reasoned invitation to re-conceptualise organizational learning as a multi-dimensional theoretical construct, and Crossan & Hulland’s (1997) measurement approach underpins much of the research reported here (Figure1. ). In particular, their proposals draw much greater attention to the possibilities and problems associated with unlearning and learning.
They allow for verbal theories of the learningperformance link to be tested, and acknowledge the possibility of ‘negative consequence’ explanations for the potential lack of empirical support. We differ however, in that we believe the different processes, which account for individual, group and organizational accounts of learning, need to be accorded more methodological critique than Crossan et al. suggest. In particular, we have found scant evidence (Gray & 7
Gonsalves, 2002) to indicate that (cross-sectional) surveys can ‘uncover’ the relationships and enabling tensions (Crossan & Hulland, 1995) that allow for the pivotal transfer of change across these dimensions. The difficulty in capturing such tensions, we believe to be an artefact of our survey, quasiexperimental methods, and possibly a consequence of the difficulty and rarity faced in observing and interpreting such tension. Our xperience in using survey approaches suggests that the essentially unique and situational characteristics of tension-derived turns in, and, addition of new logics (Lahteenmaki et al. , 2001: 120), probably best lend themselves to either anthropological approaches such as Leonard-Barton’s (1992) studies, or, the clinical-dialogical approaches offered by Senge (1990) & Schein (1993) in describing organization-wide change interventions.
In particular, the complex communicative processes of the feed forward and feedback constructs between the various dimensions, whilst easy to explain and represent to managers have proved difficult to operationalise as valid content for the purpose of questionnaire-based studies. The perspective-derived dimensions described below are therefore more closely associated with Crossan & Hulland’s (1997) three ‘pure-learning’ processes, and therefore may be asking respondents to report on organizational learning processes as stocks of firm resource, rather than the more difficult to capture learning flows.
Figure 1. ‘Levels & Processes of Organizational Learning’ Adapted from Crossan et al. (1999, p. 525) ‘SPACE’ Process Input/Outcomes Images Metaphors Experiences INDIVIDUAL ‘COGNITIVE’ Language Conceptual Map Interpreting Conversation/Dialogue GROUP ‘CONSTRUCTIVE’ Shared-understandings Mutual Adjustments Integrating Interactive Systems ORGANIZATION ‘CONSTITUTIVE’ Institutionalising Diagnostic Systems Routines Rules & Procedures Intuiting 8
We have at the risk of conceptual fallibility stretched these three ‘pure’ construct labels so as to make more explicit the processual elements (cognitive, constructive, constitutive) of the constructs in our model, rather than solely the unit level of analysis- ‘individual’, ‘social’ and ‘institutional’. We thereby make explicit our acceptance and recognition of the dynamic, indeterminate and paradoxical boundary that is otherwise implicit in many literatures.
We accord significance to the need for a relaxation in the strong, dichotomous Cartesian dualism that has hitherto been the overwhelming assumption in ‘behavioural’ and ‘cognitive’ schools of organizational learning theory (Weick, 1991). In particular we argue that the reconsideration of change and learning as a ‘duality’ through the explanatory mechanisms of active, enacted sense making (meaning- making and meaning- taking) generates a dynamic account of learning processes within firms.
From the above we infer: Proposition3: The disparate perspectives on learning processes within organizations necessitate a multi-dimensional approach for empirical studies into organizational learning as a firm specific differential resource stock. 2. 3. 1. 1: Learning Dimensions The dimensions described below are by definition partially consistent with the theoretical and empirical studies referred to in the previous section and incomplete.
We build on the intervention emphasis of the seminal theorists, from the diverse domains of organizational learning literatures in distinguishing between the dimensions. Whilst distinct, we realise the complex nature of organizational learning and the likelihood of significant overlap and interaction between the dimensions (Lahteenmaki et al. 2001:124), but we are reluctant at this stage to develop a hierarchical, level-based approach to dimension analysis. We prefer to draw on Hooley et al. s (1997) lateral typology of firm resource capabilities and assets in omitting the hierarchical dimension for the time being. 2. 3. 1. 1. 1: ‘Individual-based Personally-Cognitive’ Argyris (1982,1990,1992) socio-technical constructions of organizational learning and individual defence routines form the bedrock of this dimension. Argyris & Schon (1978, 1996) construe most individuals as being involved in what they call Model-I reasoning processes. In such instances, individuals make untested attributions, carry out unshared evaluations and offer solutions without recourse to example or illustration.
Argyris (1982) finds it difficult to imagine how in interpersonal exchanges we would be able to engage in double- loop learning, which involves questioning and changing governing conditions, given the characteristics of Model I reasoning that ‘inhibits the exchange of relevant information and reduced sensitivity to feedback’. (Edmondson, 1996) His organizational learning turn comes when he notes that as individuals skilled in Model-I reasoning processes carry them into social systems such as organizations, they create organizational conditions that inhibit double-loop learning. The organizational learning henomenon in this argument depends on the ‘if- then’ reasoning processes of individuals that constitute the organization. Furthermore, the organizational 9 environment in which individuals find their learning processes is a product of these very same reasoning processes. Edmondson (1996) notes: ‘The problem is that individuals “cause” their own social systems to malfunction by virtue of their theories-in-use- and at the same time O-I social systems “cause” individuals to reason and act as they do. This is the logic underlying Argyris’ case… a logic that accounts for the intractability of social systems’ (p. 83) According to these perspectives only if and when the individuals constituting the organization begin to engage in Model-II reasoning, allowing for double- loop learning processes, will organizations truly be capable of producing beneficial change. They argue that behaviour modification requires a change in individuals’ theories in use. It is primarily individual change dependent, with the environment being a secondary influence on the change potentiality. The emphasis is not simply one of organizational design change, but more one of how individual logic structures can be changed.
The first dimension, personal cognitive learning (PCL) is conceived of having close equivalence to Crossan & Hulland’s (1997) II-process; it includes those capabilities and activities of the firm that consider members of the firm as individual learners. It is primarily about what resides in the mind of a person as a knowing individual. The content of such knowledge is dependent on what the individual knows, their past experiences, how those experiences are organized into knowledge structures and what beliefs the individual has about those experiences.
This individual cognition frames the individual’s abilities to generate new organizational insights, ideas, information and action. Traditionally the majority of corporate intervention models (through human resource and training initiatives) have concentrated their efforts on developing and changing individual cognitions. Such models depict the learner as a solo subject discovering, inventing and mastering the organizational world through mandate. In the majority of cases, the relationship between mandates and learners is formal, unidirectional and consists of discrete, nonnegotiable communication boundaries between the wo, with information being transferred from source (change/training programme) to passive recipient (targeted learners). 2. 3. 1. 1. 2: ‘Group-based Socially-Constructive’ In contrast to the ‘cognitivist’ emphasis, constructivists (Cook & Yannow, 1993; Brown & Duguid, 1991; Lave & Wenger, 1991) suggest there is a much greater urgency for organisational learning exercises to consider the learning that takes place in group-bounded contexts Organizational learning is inferred through observing how organisational groups engage in collective action.
This then is a socio-cultural perspective of organisational learning. The organisation’s knowledge resides not in individuals’ aggregate cognitions, but in the actions of individuals performing ‘in congregate’. Organisational learning can occur independently of individuals but not in the absence of all individuals. 10 For example, Cook & Yannow (1993) argue that the ‘… socio-cultural perspective and the cognitive perspective both include the study of individuals. The difference is one of focus….
Within the cultural perspective, an individual does not hold organizational knowledge, nor do we see it as the aggregate knowledge of many individuals. What is known is known and made operational only by several individuals acting in congregate. ‘ Brown & Duguid, (1991) in discussing the idea of legitimate peripheral participation (Lave & Wenger, 1990) refute the idea that there is a need for organizational learning interventions that solely rely on ind ividuals’ internalised schematic changes.
This is because such an approach implies separation, involving some supposed external lesson crossing a boundary into the learner’s mind. To act and communicate, individuals are constantly involved in changes that blend the ‘internal’ and ‘external’- exchanges characterised by the sharing of means rather than the ‘ends’ of internalised cause-effect logic. Organizational learning is not solely driven by the need for individual self- identity, interests, preservation and sustainability in social groups (Weick 1979), but also by the need for organizational identity preservation, sustenance and acquisition.
For them such, difficult to discern, stabilising possibilities in the nature of organizational learning highlights the dangers of equating observed individual and/or organizational change with organizational learning in many descriptions of organization-wide change interventions. Cook & Yannow (1993) reconsider Weick’s (1979) account of the Duke Ellington Orchestra, which continued to thrive despite the annual turnover of its key personnel, including its founding members and leader.
They argue that the orchestra not only survived because of what Weick describes as ‘the audience recreating its concept of the Orchestra, but also because the Orchestra was able to preserve and ‘sustain its identity through long-term organisational learning: specifically, the ongoing maintenance of the patterns of collective action among the players, intimately bound up in the performance itself, has enabled the organization to survive over the years and through a change in personnel because the Orchestra continued to learn what it needed to. The second dimension, social constructive learning (SCL), then, emphasizes those capabilities and activities that consider firm members as socially embedded individuals. It recognizes the need for most individuals in most settings to engage in learning as a communal activity. It is not just that individuals must make knowledge their own in isolation, but that they must make it theirs in a community of those who have divergent and convergent aspirations around the content of that learning.
The emphasis is not on personal knowledge interpretation, discovery and invention, but on the processes of argumentation and negotiation that allow for knowledge development and learning to occur within the medium of ‘others’. The concern is with how knowledge develops through the social construction of meanings and through our everyday interactions with others, in which we represent back and forth to each other our negotiated sense of organizational realities.
Knowing in this dimension is a process of negotiating and communicating sense; not transmitting fully developed personal truths. 11 SCL strives to create environments in which individuals actively participate in ways that are intended to help them construct their own understanding of organizational problems and realities, rather than having change agents interpret organizational problems and ensure that individua ls understand such problems as he or she (the change agent) has explained them.
In SCL environments, learners are actively engaged in perceiving different perspectives, organizing and representing their own interpretations, reflecting the sense and meanings of communities to which they belong. This is not ‘active’ in the sense that individuals actively listen and then mirror the one correct view of organizational contexts (e. g. objectives, tasks, problems, etc), but rather ‘active’ in the sense that learners must participate and interact with the surrounding environment in order to invent and negotiate. . 3. 1. 1. 3: ‘Organization-based Institutionally-Constitutive’ The third dimension examined in this study, institutional constitutive learning (ICL), is an extension of the SCL idea that knowledge is built (Gray & Gonsalves, 2002). It differs, however, in that idea, information and insight construction also occurs when organizational members politically engage in the construction of something external to themselves, or at least ‘universal’ to their firm — hence the term ‘institutional’, e. g. rganizational charts, authority structure, support systems, formal procedures, committee and reporting mandates and so on. The emphasis is on the external ‘product’ of constructive processes — the constitution of the firm. In the main, ICL criteria consist of those formal and informal, but publicly recognizable and accessible coordinating mechanisms — the political mechanisms and environments that may or may not limit the relevance and ‘affectiveness’ (Vince, 2001) of organizational learning initiatives (Coopey & Burgoyne, 2000).
The idea of politically constituted (constrained and enabled) learning partially recognises the emergent, deconstructive (Boje, 1994) and social constructionist critiques of organizational learning as a domain of study. Studies in organizational learning from these perspective must not remain at risk of ignoring the wider context of the dominant [capitalist] premise (Boje, 1994) that may sustain and/or threaten many of today’s organizations. Easterby-Smith et al. 2000) note that ‘…this is a fundamental aspect and condition of learning both at the intra- and interorganizational level…’(p 793) For example, Bernstein & Beliveau (1996) found little evidence to suggest that independently owned pharmacies facing hostile (Covin & Slevin, 1989) competitive environments benefited significantly from contracting with large institutional customers, whereas those that reconfigured their internal structures of co-ordination and joined prescription buying group networks did benefit significantly.
This dimension is consistent with and has near equivalence to Crossan et al’s (1994, 1995) OO process construct: ‘Initially, this institutionalization is a means to leverage the learning of individuals. Structures, systems and procedures provide for the delegation of responsibility. New recruits can turn on these organization artefacts in a vicarious learning fashion instead of re-inventing the wheel. Over time, the individual and group learning become less dominant as the institutionalized learning at the organizational level 12 egins to both guide and be modified by learning at the individual and group learning’ (1994:20-21) In supporting the case for a multi-dimensional approach for the purposes of this study within firms we suggest: Proposition 3a: Organisational learning can be conceptualised as a multidimensional construct partially consisting of ‘personal cognitive learning’ (PCL), ‘social constructive learning’ (SCL), and ‘institutional constitutive learning’ (ICL). 3: Hypotheses and Test Generation 3. : Strategy-Making and Organizational Learning The previous sections proposed a resource-based view of competitive strategic management and organisational learning as a multidimensional construct. The final proposition argued that for the field of organisational learning to progress attempts at integrating such theoretical diversity will be of as much importance to the field as attempts to continue increasing the diversity of interpretations and explanations of the organisational learning construct (Easterby-Smith et al. 2001).
Establishing a construct’s viability, however, is not only dependent on finding support (theoretical and empirical) for its internal consistency but also its relationship, in a broader explanatory framework, to other organisational fields of inquiry and constructs. Fiol & Lyles (1985) for example argue that: “The organisation’s strategic posture partially determines its learning capacity. Strategy determines the goals and objectives (deliberate or emergent) and the breadth of actions available for carrying out the strategy (intended, or realised). The aim now is to focus on the relationship implied by many literatures, from both domains of inquiry, to exist between organisational learning as a resource-based stock and strategic management, in particular strategy making. Strategic management literatures have increasingly focused on the roles played by learning in competitive strategy. Firstly, Cyert & March, (1963) contend that the boundaries provided through strategic posturing influences learning and create a context for the perceptions and interpretations of the firm’s competitive environment.
A firm’s strategic posture is conceptualised and operationalised variously in a number of strategic management literatures (Miles and Snow, 1978; Mintzberg, 1973; Covin and Slevin, 1989). Generally, strategic postures are the firm’s orientation and placement within its competitive environments whe n considered against criteria such as the firm’s tendency toward pro-activeness vis-a-vis competitors, innovation and risk-taking (Covin 1991). Strategic postures are also argued to be dependent on the choices made through the firm’s 13 ndividual, business-related decisions along these dimensions, and will include decisions regarding issues such as pricing, competitive response, financing, etc. (Covin 1991). Secondly, Fiol & Lyles (1985:805) maintain that the perceived strategic options are also a function of the firm’s learning capacity. Therefore, although both strategy making and organizational learning are concerned with the relationship that a firm has with its environment in securing sustained competitive advantage they are distinct constructs.
The relationship between the two as conceptualised in leading literatures remains one of ambiguous, reciprocal causation. That is, whilst strategic management literatures have inferred organisational learning as a key process in managing for competitive advantage, very few have examined the actual learning resource-based processes within firms- that is as an intra- firm capability. Contiguously, organisational learning theorists are increasingly recognising their failures in integrating their frameworks with substantive business issues. Edmondson & Moingeon, 1996) 3. 2: Entrepreneurship, Learning & Strategy-Making Modes Entrepreneurship as an ‘invisible college’ Venkataraman (1997) of study has sought to establish boundaries through debates that may reflect the maturing and theoretical development of a young applied science. Venkataraman (1997) and Shane & Venkataraman (2000) contend that much of the scholarly work on entrepreneurship continues to rely on frameworks that are already in existence to explain and predict empirical phenomena.
In particular, they argue that ‘…studies which focus solely in terms of who the entrepreneur is and defining the field in terms of the individual alone [e. g. trait-theories which seek to answer questions about ‘who is an entrepreneur? ’]…ignore other process factors such as knowledge, cognitions and behaviours…’(Venkataraman, 1997, p. 8) Such an approach seeks to shift the focus from the ‘who is an entrepreneur debate? ’ to ‘what is entrepreneurship? and integrates a strong knowledge-based approach to the field in which learning processes for rent-generating discovery are a central tenet. It is consistent with their definition of entrepreneurship as a college of scholarly endeavour: ‘…it seeks to understand how opportunities to bring into existence ‘future’ goods and service are discovered, created and exploited…’ (Venkataraman, 1997, p. 3) Shane and Venkataraman’s (2000) perspective implies a gap in the domain of entrepreneurship studies that is consistent with a learning process approach to entrepreneurship theory building.
Such a definition is a positive theory of entrepreneurship and is congruent with the ideas of the positive resource-based theories of the firm and management discernment outlined above (Lichtenstein & Brush, 2001) (Conner, 1991). We go further in arguing that they imply an entrepreneurial resource learning theory of the firm strongly aligned to the firm resource- learning theories outlined above (Mahoney,1995), 14 and recent literatures (Dess et al. 2003; Gray & Gonsalves, 2002; Lichtenstein & Brush, 2001; Morris et al. 2001; Rae & Carswell, 2001). This study attempts to fill some of the void by operationalising Mintzberg and Waters’ (1985) deliberate-emergent typology to develop core hypothesis for a study using a survey of SME firms. Drawing on Mintzberg & Waters’ (1982) study of strategic entrepreneurial success at Steinberg’ Inc. , Mintzberg & Waters (1985) suggest that strategic learning is associated with emergent strategies- ‘emergent strategy itself implies learning that works’ (McKevitt et al. 1992).
In addition, they argue that the entrepreneurial strategy- making modes (Mintzberg, 1973; Hart, 1995) will be particularly pertinent when managing for emergent strategies in firms operating in hostile and complex environments: ‘Such behaviour is especially important when an environment is too unstable or complex to comprehend- or too imposing to defy’ (McKevitt et al. , 1992: 4) They make explicit the link between entrepreneurial strategy- making modes, learning, uncertain competitive environments and suggest that entrepreneurial firms with managers who value and recognise such linkages are likely to achieve performance success.
From the above therefore we are able to derive the following hypotheses: H1: Firms engaged in entrepreneurial modes of strategy making, with positive orientations to intra- firm organizational learning, facing hostile competitive environments will demonstrate evidence of sustainable competitive advantage. H2: Firms engaged in non-entrepreneurial modes of strategy making, with positive orientations to intra- firm organizational learning, facing stable competitive environments will demonstrate evidence of sustainable competitive advantages. 3. 3: Configuration Perspective of Strategy and Learning
The comprehensive attention given to the Mintzberg & Waters (1985) typology reflects a strong intuitive appeal but betrays a lack of empirical investigation and support for the theory 3 (Doty et al. , 1993). Configuration studies (Venkatraman, 1990) of strategy (Miles & Snow, 1978; Mintzberg, 1973, 1978, 1985) seek to operationalise building blocks for theory construction. The above framework and hypotheses fall into this general category of configuration research and forms the basis of an exploratory and descriptive study in the ongoing process of theoretical and empirical development.
At this stage of the research, we resist adopting a contingency approach (Gnyawali, 2003) when testing the above hypothesis. Firstly, although the measurement limitations of configuration versus contingency perspectives are recognised, Venkatraman (1989) notes that 3 Being explicit with perspectives and underlying assumptions of coalignment adopted by the research is critical because it determines the appropriate statistical test/s to be used (see Venkatraman, 1989, 1990) 15 ‘…using exploratory perspectives (configurational approaches) that are less recise 4 in specifying the functional form of fit may be more appropriate in the earlier stages of seeking empirical support for hitherto verbalised concepts, but as the research stream matures, using confirmatory perspectives would be more appropriate…’ Secondly, typology theories do not hypothesise the relationships between ‘ideal’ type patterns. Instead, they concentrate on emphasising, and hypothesising the relationship between ‘type’ and other multi-dimensional constructs.
Doty & Glick (1994) suggest that typological theories use ‘types’ to explain levels of dependent variables (e. g. performance). We disagree with this in the context of the deliberate-emergent typology. The position here is that the deliberate-emergent typology is not a normative theory of strategy. Rather, it aims to highlight hypothesised relationships between the strategy- making mode variable, and other, although not necessarily dependent, variables (e. g. learning, performance, environment).
Presenting the above perspectives of fit allows access to how we operationalise the problematic correspondence between the verbal construct definitions and statistical tests used to describe the Strategy-Learning- Environment relationship. 4: Summary The series of propositions outlined in this paper provides a framework within which researchers can empirically test and shed further light on the diverse claims made about the process of intra- firm learning within the various domains of study.
It seeks to provide a mechanism whereby the relationship between different learning processes and other valuebased firm resources are evaluated and described. We have attended to the significant lack of empirical explication and testing of implied theories and models. In line with recent concerns, we have also emphasised our belief that the next wave of entrepreneurial resource learning studies will need to complement their considerable conceptual gains and arguments with rigorous, exploratory measurement-based support.
The framework sustains the growing debate concerning the contribution of organizational learning as a multi-dimensional concept offering significant value to the field of enterprise inquiry, whilst acknowledging the limitations imposed by the divergent, methodological and philosophical sources of its key proponents. We have supported arguments for a crossdisciplinary, integrative approach to organizational learning by synthesising coherent streams of argument across apparently disparate literatures and domains of inquiry into a congruent system of defendable, plausible and yet fallible propositions.
In doing, so we hope not to have added to the hodge-podge of entrepreneurship research highlighted by Shane & Venkataraman (2000) but instead attempted a strong case for building empirical work that can contribute to their project by consistently exploring potential contributions contained within other fields of study. 5: References A complete set of references is available from the author. 4 Constructs as either form, or pattern, or multiple ‘first-order’ dimension coalignment. (Doty & Glick, 1994) 16
