Patricia Klarner

The Rhythm of Change

GABLER RESEARCH

Patricia Klarner

The Rhythm of Change A Longitudinal Analysis of the European Insurance Industry

With a foreword by Prof. Dr. Gilbert Probst

RESEARCH

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Dissertation University of Geneva, 2009

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Foreword

To survive and grow, organizations constantly have to adapt to their environment. The practi-cal as well as the empirical world has for decades mentioned the increasingly dynamic and complex industry environments. Nevertheless, research has largely concentrated on measuring the short-term outcomes of single incremental and radical changes as well as the factors and processes underlying change.

Today’s organizations are increasingly confronted with making repeated change decisions in order to adapt to changing industry environments. In the midst of a global financial and eco-nomic crisis, the analysis of frequent and repeated change in organizations is more important than ever. For organizations operating in quickly changing industries, timing changes cor-rectly is crucial to ensure competitiveness and long-term success. Undoubtedly, the right tim-ing of change is also of great interest to managers as it permits them to capture and use win-dows of opportunities intelligently and intervene at the right moment when urgency is per-ceived, when resources can be used best, and when effectiveness is optimal.

Research on the timing of changes and the resulting rhythm of changes in firms is still rare. Time and timing were not sufficiently researched for many reasons, whether due to complex-ity, manifold differences in industries, the need for long-term studies, difficulties with defin-ing patterns of variability in the intensity and frequency of organizational changes, the de-pendencies of environmental evolutionary patterns, the lack of models and insights into the pace of change over time as well as performance outcomes.

Patricia Klarner truly gains in-depth insight into how organizations that undergo a series of changes over time can improve their long-term performance. More specifically, she examines the role that the rhythm of change plays and the change rhythm’s relationship with long-term performance. Her concept of change rhythm and the consistent and systemic theoretical model of the determinants of the outcomes of organizational changes are of great interest for re-search-oriented readers. She clarifies and creates attention for the importance and understand-ing of long-term performance when analyzing repeated change. She also develops a model which deals with the factors moderating the relationship between an organization’s change rhythm and long-term performance. Patricia’s excellent background in organization theory, strategic management and learning organizations, her experience with case study research, and her quantitative econometric skills are invaluable for such an endeavor and prove fruitful in developing research models and interpreting research results.

Readers are provided with results from an empirical study that used a longitudinal dataset of 67 insurance firms in Western Europe (Benelux, France, and the UK) and Central Europe (Austria, Germany, and Switzerland), covering the period between 1995 and 2004. The Euro-pean insurance industry offers an excellent opportunity to test Patricia’s hypotheses as it underwent serious changes during the study period, such as the deregulation in 1994 and the subsequent consolidation through a wave of acquisitions, the economic boom of the late 1990s, the stock market downturn in 2000, and the September 11 attacks in 2001.

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Patricia has generated this comprehensive and unique dataset at the Center for Organizational Excellence (CORE) at the University of St. Gallen. For many years, she has worked as a re-search associate at the research center CORE, a joint venture between two leading Swiss uni-versities, St. Gallen and Geneva. CORE investigates the impact of well-balanced leadership and organization on sustainable corporate development. Researchers develop innovative and scientifically grounded leadership and organization concepts in close collaboration with cor-porate partners. Patricia’s longitudinal study of strategic change rhythms integrates fully into this larger research frame.

This book provides new insights into and a broader understanding of strategic change rhythms and how they can be related and managed towards sustained long-term organizational performance. Patricia’s study is innovative and of significant importance in identifying different strategic change rhythms and examining their performance outcomes and, thereby, providing managers with a means to create a performance-enhancing balance between stability and change in their organizations. It is a measure of Patrica’s skills that – despite the high academic standard and the lack of research in this field – this book is easily understandable. It is highly recommended for researchers, managers, and students.

Prof. Dr. Gilbert Probst

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Acknowledgements

As Robert Frost said, “Two roads diverged in a wood, and I – I took the one less travelled by – and that has made all the difference.” This dissertation mirrors my professional develop-ment over the past years, and it was truly characterized by taking a different road. It has been a challenging, inspiring, and catalyzing learning journey. If one decides to take a road less travelled by, success is not only accomplished by one’s own passion, dedication, and persis-tence, but also by the constant support of others. I would like to thank everyone who sup-ported me in following my passion, leveraging my creativity, challenging my thinking, and strengthening my belief in the added value of exploring new phenomena.

First of all, I would like to thank my dissertation committee for taking me on this wonderful learning journey. My PhD advisor, Prof. Dr. Gilbert J.B. Probst, has been a tremendous source of inspiration, knowledge, and support throughout the past years. Our energetic discus-sions about my research enabled me to broaden my analytical lenses for studying organiza-tional phenomena and to strive for insight of academic rigor and managerial relevance. Gil-bert’s confidence in me and his moral encouragement provided the backup to truly enjoy this project. He has urged me to follow my passion for academic research and constant learning, and gave me the intellectual freedom to explore several theoretical topics. By involving me in his activities for the World Economic Forum’s Global Leadership Fellows Program, Gilbert opened my eyes to the fascinating world of leadership and exposed me to a multitude of inspi-rational knowledge exchanges. Above all, Gilbert constantly helped me to develop my aca-demic profile as a scholar and became a true mentor and a highly valuable source for honest advice. I could not have wished for a better PhD advisor and I am thrilled about continuing our common projects.

Prof. Dr. Sebastian Raisch has been an essential discussion partner throughout this project as well as a valuable source in obtaining constructive feedback. Sebastian enabled me to con-stantly steepen my learning curve by challenging my thinking and by providing important insight on multiple dimensions of my dissertation. In addition, he was and is a brilliant co-author for several of my publications. I always enjoy sitting down with Sebastian for hours to go on an intellectual journey of discussing our ideas and developing new articles. I look for-ward to collaborating with him in the future.

My thought-provoking discussions with Prof. Dr. Susan Schneider and her precious feedback enabled me to make this dissertation stronger. Susan’s editorial comments enabled me to clar-ify my academic thinking and writing and she has broadened my academic perspectives, for which I am highly thankful. I would also like to thank Prof. Dr. Bernard Morard of the Uni-versity of Geneva who has provided helpful comments on my dissertation. I enjoyed his dif-ferent perspectives on certain aspects of my dissertation as well as his valuable advice.

During this project, I received additional support by researchers at several institutions in Europe and the United States, all of whom had their share in making me complete this disser-tation. I owe considerable gratitude to Prof. John R. Kimberly for inviting me to the Wharton School at the University of Pennsylvania in Philadelphia. My time at Wharton enabled me to

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immerse in a highly stimulating research environment. John provided me with decisive feed-back on my research and our constructive discussions have been an immense source of learn-ing to me. I deeply appreciate his availability as my advisor at Wharton, our enriching dia-logues, and his guidance for my career. I am also very grateful to Prof. Michael Useem at the Wharton School who broadened my research lens to leadership and corporate governance questions. My fascinating discussions with Mike were a tremendous source in expanding my knowledge and stimulating my thoughts. Mike’s wonderful receptiveness for new ideas and his intellectual agility invariably encouraged my research and I truly enjoy collaborating with him. My thanks also go to Prof. Ian MacMillan for inviting me to his entrepreneurship re-search team meetings and his Executive MBA courses at Wharton. I would like to thank the Swiss National Science Foundation (SNF) for funding my stay at the Wharton School through a doctoral scholarship.

I would like to thank the European Centre for Analysis in the Social Sciences (ECASS) at the Institute for Social and Economic Research at the University of Essex in the UK for inviting me as a visiting researcher in June 2008. The fruitful discussions with many econometricians at ECASS provided me with the skills to complete the empirical part of my dissertation. This visit was supported by the Access to Research Infrastructures action under the EU Improving Human Potential Programme.

My thanks also go to Dr. Tobias Schreck and Sebastian Bremm of the Technical University in Darmstadt, Germany, for their availability and valuable insight, which helped me to develop a measure for the rhythm of change in my dissertation. Jörg Schläpfer of the Center for Organ-izational Excellence (CORE) at the University of St. Gallen in Switzerland provided excellent assistance during the data collection period.

My colleagues at the University of Geneva have always been a source of personal support, encouragement, and much laughter over the past years. I wish to thank Stefano Borzillo, Gaetan Devins, Katty Marmenout, and Achim Schmitt, who always showed amazing team spirit and made my time in Geneva a bonding, fantastic experience.

I would also like to thank all PhD students at the Wharton School’s Management Department who provided me with very useful feedback on my research, who were always available for discussing research ideas and empirical questions, and who made my stay at Wharton an out-standing experience. Special thanks go to Aseem Kaul, Elisa Alvarez-Garrido, Colleen Rye, and participants of the Wharton PhD seminar. I am truly thankful for my friends in Philadel-phia who made me feel home so quickly, in particular Florian Bertram, Mareike Hohner, Mar-tin Ihrig, Alicia Polak, and my Wharton MBA friends of the class of 2009.

This dissertation is influenced by many dialogues and the wonderful support of my friends. In particular, I wish to thank Caroline Lehr for several inspiring discussions that expanded my creative thinking beyond the domain of management research and her encouraging words so close to finishing this project. I also wish to thank Iris Schäffner for her constant support throughout this dissertation, for being such a great friend and an important interlocutor, and

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for her valuable proofreading. Likewise, Marianne Metz has always been close, no matter which part of the world I decided to live in, for which I am very thankful.

I am deeply grateful to Praveen K. Lingathoti who has been an immense source of support in the final phase of my dissertation. I wish to thank him for constantly challenging my thinking and research ideas, for never accepting a first answer, for believing in me, for his patience, his outstanding proofreading, and his encouragement on so many levels. I am thankful that our paths crossed at Wharton.

Finally, I am deeply indebted to my family who always supported the decisions I made in my life, who showed unconditional faith in me, who had trust in my abilities, and who gave me the necessary love, encouragement, generosity, and intellectual basis to help me become the person I am today.

I dedicate this dissertation to my mother, a true role model for female intelligence, strength, and love, and to my grandmother who has taught me to always listen to my heart.

Patricia Klarner

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Table of Contents

I. Introduction......................................................................................................................... 1I.1 Research Interest ........................................................................................................... 1 I.2 Research Objectives...................................................................................................... 4 I.3 Model Development and Hypotheses ........................................................................... 5 I.4 Research Methodology ................................................................................................. 6 I.5 Structure of the Study ................................................................................................... 7

II. Literature Review............................................................................................................... 9II.1 Organizational Change: An Overview .......................................................................... 9

II.1.1 Reasons for Organizational Change ...................................................................... 10 II.1.2 Results of Organizational Change ......................................................................... 12 II.1.3 Perspectives on Organizational Change ................................................................ 13 II.1.4 Conclusion and Criticism ...................................................................................... 16

II.2 Timing of Organizational Change ............................................................................... 16 II.2.1 Definitions and Key Concepts Related to Timing of Change ............................... 17 II.2.2 Long-Term View on Change: Change Timing and Change Frequency................ 22 II.2.3 Conclusion and Criticism ...................................................................................... 24

II.3 Theoretical Perspectives on Organizational Change Patterns ..................................... 25 II.3.1 Evolutionary Theory.............................................................................................. 28 II.3.2 Theories of Organizational Learning..................................................................... 36 II.3.3 Conclusion and Criticism ...................................................................................... 38

II.4 The Rhythm of Change................................................................................................ 40 II.4.1 Definition of the Rhythm of Change ..................................................................... 41 II.4.2 Literature on Change Rhythms.............................................................................. 42 II.4.3 Conclusion and Criticism ...................................................................................... 44

III. The Rhythm of Strategic Change: Towards a Comprehensive Research Model ..... 47III.1 Criticism of Existing Literature................................................................................... 47

III.1.1 Repeated Change and Performance...................................................................... 48 III.1.2 Important Contingencies ...................................................................................... 49 III.1.3 Conclusion and Criticism..................................................................................... 52

III.2 Foundation of a Comprehensive Research Model ...................................................... 54 III.2.1 Reference to Rhythm of Change and Performance.............................................. 55 III.2.2 Reference to Important Contingencies................................................................. 60 III.2.3 Overall Frame of Reference ................................................................................. 66

III.3 Model Development and Hypotheses ......................................................................... 68 III.3.1 Research Model of the Rhythm of Strategic Change........................................... 69 III.3.2 Relationship between Change Rhythm and Performance .................................... 70 III.3.3 Key Dimensions of the Change Rhythm: Financial Contingencies..................... 73 III.3.4 Key Dimensions of the Change Rhythm: Knowledge-Related Contingencies.... 74 III.3.5 Conclusion............................................................................................................ 78

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IV. Research Methodology ................................................................................................... 79IV.1 Research Orientation................................................................................................... 79 IV.2 Research Design .......................................................................................................... 82

IV.2.1 Research Setting................................................................................................... 82 IV.2.2 Data Collection Method ....................................................................................... 84 IV.2.3 Research Sample .................................................................................................. 89

IV.2.3.1 The European Insurance Industry ................................................................. 91 IV.2.3.2 Sample Selection Criteria............................................................................ 109

IV.2.4 Unit of Analysis ................................................................................................. 114 IV.3 Measures and Operationalizations............................................................................. 114 IV.4 Final Sample ............................................................................................................. 128IV.5 Data Analysis ............................................................................................................ 131

IV.5.1 Reliability........................................................................................................... 131IV.5.2 Validity............................................................................................................... 133IV.5.3 Data Analysis Techniques.................................................................................. 135 IV.5.4 Conclusion ......................................................................................................... 139

V. Research Findings .......................................................................................................... 141V.1 Qualitative Analysis to Develop a Measure for the Rhythm of Change ................... 141

V.1.1 Specification of Qualitative Data Analysis ......................................................... 141 V.1.2 Qualitative Research Findings............................................................................. 150 V.1.3 Interim Conclusion .............................................................................................. 156

V.2. Multiple Regression Analysis ................................................................................... 157 V.2.1 Results of Multiple Regression Analysis ............................................................ 157 V.2.2 Summary of Research Findings for Cross-Sectional Analysis ........................... 168

V.3. Panel Data Analysis................................................................................................... 169 V.3.1 Research Findings of Panel Data Analysis.......................................................... 169 V.3.2 Summary of Research Findings for Panel Data Analysis ................................... 201

V.4 Discussion and Interpretation of Research Findings.................................................. 204 V.4.1 Interpretation of Research Findings .................................................................... 204 V.4.2 Research Implications ......................................................................................... 217 V.4.3 Managerial Implications...................................................................................... 222

VI. Conclusion ..................................................................................................................... 231VI.1 Summary of Research Findings and Implications .................................................... 231 VI.2 Limitations of the Study............................................................................................ 237 VI.3 Suggestions for Future Research............................................................................... 239 VI.4 Concluding Comments.............................................................................................. 240

References…………………………………………………………………………………..241Appendix…………………………………………………………………………………....269

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List of Figures

Figure 1: Reasons and Consequences of Organizational Change...................................... 12 Figure 2: Theoretical Perspectives on Organizational Change Patterns............................ 27 Figure 3: Two-step Analytical Process of the Study ......................................................... 68 Figure 4: Research Model.................................................................................................. 69 Figure 5: Characterization of Paradigms of Scientific Inquiry.......................................... 82 Figure 6: Longitudinal Research Designs.......................................................................... 84 Figure 7: Insurance Density in Europe, 1994 - 2004......................................................... 93 Figure 8: Insurance Penetration in Europe, 1994 - 2004 ................................................... 94 Figure 9: Total Gross Premiums in Europe, 1994 - 2004.................................................. 95 Figure 10: Risk Transfer between Actors in the Insurance Industry ................................... 99 Figure 11: European Insurance Industry: Market Segmentation ....................................... 100 Figure 12: Evolution of European Insurance Industry, 1994 - 2004 ................................. 108 Figure 13: Area Sample Distribution by Country.............................................................. 113 Figure 14: Area Sample Distribution by Insurance Segment ............................................ 113 Figure 15: Overview of Measures ..................................................................................... 116 Figure 16: Example of Single Company Profile Sheet...................................................... 119 Figure 17: Response Distribution by Country ................................................................... 129 Figure 18: Response Distribution by Segment .................................................................. 129 Figure 19: Statistical Analysis Techniques for Hypotheses .............................................. 141 Figure 20: Frequency Distribution of Strategic Changes, 1995 - 2004 ............................. 142 Figure 21: ClustalW Multiple Sequence Alignment Process ............................................ 146 Figure 22: Alignment File for Total Strategy Changes, 1995 - 2002 ................................ 147 Figure 23: Classification Scheme of Change Rhythm Categories..................................... 150 Figure 24: Regular versus Irregular Rhythm of Organizational Change........................... 151 Figure 25: Strategic Change Rhythm Types...................................................................... 153 Figure 26: Examples of Strategic Change Rhythm Types................................................. 154 Figure 27: Strategic Change Rhythms for All 67 Companies in the Sample .................... 155 Figure 28: Strategic Change Rhythms for Dummies 1 - 4 ................................................ 156 Figure 29: Summary Statistics of Multiple Regression Variables, 2001........................... 158 Figure 30: Correlations, 2001 ............................................................................................ 160 Figure 31: Results of OLS Regression on Average Market-Adjusted ROE

(2-Year Lag)..................................................................................................... 162 Figure 32: Coefficients for Interaction of Change Frequency and Regular Rhythm......... 165 Figure 33: Results of OLS Regression on Average Market-Adjusted ROE

(2-Year Lag) and Duration Variability as Rhythm Measure............................ 166 Figure 34: Results of OLS Regression on Average Market-Adjusted ROE

(2-Year Lag) and Kurtosis of Frequency Change as Rhythm Measure ........... 167 Figure 35: Summary Statistics of Fixed Effects Panel Regression Variables ................... 170 Figure 36: Correlations for Variables of Hypotheses 3a - 3d ............................................ 170 Figure 37: Results of Fixed Effects Panel Regression for Hypotheses 3a - 3d ................. 171 Figure 38: Relationship between Change Duration and Performance............................... 173 Figure 39: Moderating Effect of Performance Crisis on Relationship between

Change Duration and Performance .................................................................. 175

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Figure 40: Moderating Effect of Prior Available Slack on Relationship betweenChange Duration and Performance .................................................................. 176

Figure 41: Correlations for Hypotheses 4a - 4d................................................................. 178 Figure 42: Fixed Effects Panel Regression Results ........................................................... 179 Figure 43: Relationship between Change Stability and Performance ............................... 180 Figure 44: Correlations for Hypothesis 5 and Hypotheses 7a - 7d.................................... 183 Figure 45: Results for Hypothesis 5 .................................................................................. 184 Figure 46: Interaction Effects of Strategic Change, Prior Change Duration and

CEO Change..................................................................................................... 187 Figure 47: Correlations for Hypothesis 6 and Hypotheses 8a - 8c .................................... 189 Figure 48: Results for CEO Change .................................................................................. 190 Figure 49: Results for Internal and External CEO Change ............................................... 192 Figure 50: Interaction Effects of Strategic Change, Prior Stability Duration and

CEO Change..................................................................................................... 194 Figure 51: Statistical Results for Hypotheses 7a - 7d........................................................ 197 Figure 52: Interaction Effects of Strategic Change, Prior Change Duration, Prior

CEO Change and Prior Top Management Team Turnover.............................. 198 Figure 53: Results for Hypotheses 8a - 8c......................................................................... 199 Figure 54: Rhythms of Punctuated, Temporal Switching, Focused and Regular

Change.............................................................................................................. 206 Figure 55: Performance Impact of Individual Change Rhythm Types.............................. 208 Figure 56: Combined Performance Effect of Different Change Rhythm Types and

Change Frequency............................................................................................ 209Figure 57: Threshold of Strategic Change......................................................................... 211 Figure 58: Moderating Effects of Prior Slack on the Relationship between Change

Duration and Performance for High and Low Prior Slack............................... 213Figure 59: Combined Performance Effect of Strategic Change and Prior CEO

Change for High and Low Prior Change Durations......................................... 214 Figure 60: Five Steps to Enhance Organizational Capacity for Repeated Change ........... 229 Figure 61: Contributions of the Study ............................................................................... 236

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I. Introduction Willingness to change is a strength, even if it means plunging part of the company into total confusion for a while.

Jack Welch

The quest for change has never been stronger than in today’s turbulent markets. Companies that operate in such environments have to develop the ability to seize new opportunities, ad-just their strategies to volatile markets, and avoid complacency (Birkinshaw & Gibson, 2004). While organizational change is necessary, it also involves risks. BP executive Fiona MacLeod, who has more than 20 years’ experience in leading change management programs in the United States, Europe and New Zealand, has for example recently emphasized that the corporate world is ‘addicted’ to serial change management programs that consume massive resources, but ultimately fail to solve the problems they aim to address (Knowledge@Wharton, 2009a). She has described how many change management programs fail, only to be followed by similar initiatives within a year or two, and often before the origi-nal program has been completed. While this observation is not new, it is becoming more relevant for organizations that operate in increasingly dynamic industries. Birkinshaw and Gibson (2004) have highlighted that suc-cessful companies possess the ability to change. These companies also have the ability to ex-ploit the value of their proprietary assets, roll out new business models quickly, and improve efficiency in existing operations. Change as well as stability matter in order for organizations to succeed in dynamic environments. However, it remains unclear how organizations can combine the paradoxical forces of change and stability optimally over time, in order to avoid the downsides of each force.

I.1 Research Interest It is widely accepted in management literature that organizations have to adapt to increasingly dynamic environments in order to succeed (Chakravarthy, 1982). Environments are character-ized by growing complexity and turbulence (Huber & Glick, 1995), i.e.,rapid changes in the legal, political, or technical conditions that affect the basis of competition in an industry (Tushman, Newman, & Romanelli, 1986). Organizational change is therefore a topic that is continually studied in the management field. Moreover, it is very important for managers who have to decide on changing or maintaining their organization’s strategic direction. In addition, organizational change can affect entire economies, implying massive layoffs as part of corpo-rate restructurings or acquisitions that seriously affect the labour market. Van de Ven and Poole (1995: 512) define organizational change as “an empirical observation of difference in form, quality, or state over time in an organizational entity.” Changing envi-ronments increasingly force companies to implement major change in their strategies (Burgelman, 1991a; Huy, 2001). Corporate strategy is a core feature of an organization

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(Hannan & Freeman, 1984) that is central to aligning the organization with its environment (Gordon, Stewart, Sweo, & Luker, 2000). Changes in strategy are defined as a “difference in the form, quality, or state over time in an organization’s alignment with its external environ-ment” (Rajagopalan & Spreitzer, 1997: 49). Examples of major changes in corporate strategy are diversifications (Sharma & Kesner, 1996), acquisitions (Hitt, Harrison, Ireland, & Best, 1998) and strategic turnarounds (Barker & Duhaime, 1997). The quest to adapt to shifting environments has led to an extensive body of literature on the benefits of organizational change (Greenwood & Hinings, 1996). Researchers have also emphasized the drawbacks of change, underlining the risks and costs involved (Hannan & Freeman, 1984). Too many changes within a short period can lead to overload, which overwhelms management and alienates employees who are weary of change and sceptical of the latest corporate initiatives. While companies have accepted that they either adapt or ‘die’, such change remains difficult to pull off. A failure rate of about 70% of all change initiatives exemplifies that few compa-nies manage the change process as efficiently as they would like (Beer & Nohria, 2000). In response to the fact that today’s organizations are confronted with several environmental upheaveals over time, recent change literature has focused on the analysis of several series of changes over time rather than single changes in isolation. An example of a major upheaval is the US subprime crisis that manifested itself through accelerating liquidity issues in the US banking system in late 2006, triggering a global financial and economic crisis from 2007 on-wards.1 Current market turbulences reflect the pressure on companies to adapt their strategies to such massive external shock. Major banks, such as UBS and Credit Suisse, have announced large write-downs and a focus on cost-cutting and efficiency,2 and the subprime crisis is likely to lead to a wave of acquisitions that consolidate the banking industry.3 This illustrates that managers are continuously challenged to question the strategic positioning of their companies. This study therefore analyzes repeated strategic changes. Researchers with an interest in understanding series of changes have studied the overall change frequency, i.e., the total number of changes over a certain period. These studies have revealed equivocal findings regarding the performance impact of change (e.g., Amburgey, Kelly, & Barnett, 1993; Haveman, 1992). In subsequent studies, scholars have argued that not only the frequency (how much change?), but also the moment when changes occur within a sequence of changes, i.e., the timing of change (when to change?), may explain performance (Huy, 2001). This study intends to add to this literature by analyzing the role of the timing of repeated change. Studies on the timing of change can be classified according to three dimensions: First, change scholars have used the temporal lens to analyze the pace of change, i.e., the speed with which change occurs (Amis, Slack, & Hinings, 2004; Huy, 2001). Strategy literature for example emphasizes the importance of speeding up operations in order to build a competitive advan-tage, which is crucial in industries with shortened product life cycles (Kessler & Chakrabarti,

1 http://www.economist.com/finance/displaystory.cfm?story_id=10854746 (retrieved on April 15, 2008). 2 http://www.economist.com/finance/displaystory.cfm?story_id=10700678 (retrieved on April 15, 2008),

http://www.nytimes.com/2008/04/24/business/worldbusiness/24suisse-web.html (retrieved on April 24, 2008). 3 http://www.dw-world.de/dw/article/0,2144,2765627,00.html (retrieved on March 20, 2008).

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1996a). However, being the first to market a new product may not guarantee long-term suc-cess if competitors apply a strategy of fast imitation (Kerin, Varadarajan, & Peterson, 1993). Second, scholars have analyzed the sequencing of change, i.e., the order in which change unfolds (Tyre & Orlikowski, 1994). Empirical findings suggest that accumulated changes in strategy might initiate a tendency to change in the same direction, and that this tendency is interrupted by signals such as poor performance (Haleblian, Kim, & Rajagopalan, 2006). Third, there is synchronization, which describes the way elements are brought together in the right place at the right time (Moore, 1963). With an emerging perspective of timing as a new research lens, organizational scholars have begun to combine the dimensions of change timing in studies on the rhythm of change. A change rhythm is defined as a pattern of variability in change intensity over time (Vermeulen & Barkema, 2002). A change rhythm is characterized by periods of major change as well as periods of stability. The few existing studies provide evidence that a regular change rhythm benefits performance (Brown & Eisenhardt, 1997; Vermeulen & Barkema, 2002). It has been argued that organizations that change their strategies too often and with a quick pace face high cost burdens, which may be detrimental to their performance. Conversely, organizations that do not adapt their strategies to changing environments cannot maintain their successful mar-ket position in the long term. It has therefore been emphasized that paying close attention to time in organizational evolution is critical. Managerial choices between persistence and change are painful when managers have little experience with it, and when they have only limited time to wait for competitors’ actions (Gersick, 1994). Organizations that, for example, regularly acquire new companies can learn how to screen their acquisition targets and how to best integrate those acquisitions over time. For example, the US networking giant Cisco has achieved tremendous success with its 71 acquisitions between 1993 and 2001 (Mayer & Kenney, 2004). Conversely, an irregular change rhythm can lead to detrimental performance in the long run. The Swedish-Swiss industrial company ABB,consistently mentioned as one of the world’s most admired and well-managed companies, went through 60 acquisitions in only two years, as well as a series of restructurings (Probst & Raisch, 2005). As a result of these concentrated changes, the company’s debts had ballooned in 2000 and its performance was falling steadily (Rosenzweig, 2007). While there is evidence that a regular change path benefits performance, today’s firms are increasingly unable to plan regular strategic changes beforehand. Instead, they operate in en-vironments that change irregularly, i.e., at a discontinuous speed, which forces companies to adapt spontaneously. This results in regular or irregular organizational change rhythms that are partly determined by companies’ environments (Sachs, Dieleman, Fendt, Kaminska-Labbé, Thomas, & McKelvey, 2006). Organizations therefore face the challenge to manage change rhythms in order to avoid detrimental performance results, such as in the ABB case. Prior studies have however not sufficiently examined the impact of such a change rhythm on performance, or how change rhythms can be managed to achieve sustained performance. Despite the invaluable contributions of prior studies on repeated organizational change, the conflicting findings raise the question of whether the timing of change matters for perform-ance, and which rhythm of change is most beneficial for performance in the long run. The

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existing literature lacks a comprehensive approach in analyzing the complexity involved in repeated organizational change. While researchers as well as managers feel the need to under-stand repeated change and the management thereof better, no study has yet examined possible contingencies on the relationship between change rhythms and organizational performance.

I.2 Research Objectives The rhythm of change describes how organizations time their strategic changes, which results in a sequential order of change and stability in the long run. In order to better understand how organizations change successfully over time, change rhythms should be studied in relation to long-term performance. In particular, a long-term rhythm of strategic change might be an ade-quate means to balance the conflicting forces of change and stability in organizations (e.g., Van de Ven & Poole, 1988). A better understanding of how to time changes is critical if man-agers want to avoid performance downturns that result from too many uncontrolled change initiatives. At the same time, it can help managers to adapt to an increasing number of indus-try upheavals, such as the current subprime crisis or legislative changes. Hence, a major ques-tion raised in this study is how the strategic change rhythm is associated with performance. To answer this question, a research model on the strategic change rhythm and performance is established. While the aim of this study is to develop a comprehensive model, it also wants to reduce the inherent complexity and dynamics to a practicable level (Raisch, 2005). Conse-quently, a sequential research approach is used in which complexity, and thus more variables, are added gradually from one analytical step to the next. This sequential approach is guided by several research objectives: The overall goal of this study is to develop a comprehensive model on the relationship be-tween the strategic change rhythm and organizational performance.

This overall research goal is broken down into four subordinate research objectives to ensure concretization of the goal, and manageability of the empirical analysis. A major concern regarding the existing literature is that it encompasses a wide variety of terms and definitions related to a series of organizational changes. The literature also includes an ongoing debate about how organizations change repeatedly over time. Several models ex-ist, and different authors raise the benefits of different change paths for organizational per-formance. Concrete measures for the rhythm of change are rare. This first subgoal of this study is therefore to analyze how organizations change over time in order to explore the vari-ety of change paths that might not be clear from prior studies and to define a measure of change rhythms that can be included in the research model. The first research objective is to identify rhythms of strategic change and integrate them into the research model of change rhythms and organizational performance.

In a second step, different contingencies on the relationship between change rhythm and per-formance identified in prior studies have to be integrated into the research model. While it is impossible to include all internal and external contingencies, the objective is to include those

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factors that have been identified repeatedly as major boundary conditions in prior studies of repeated organizational change.

The second research objective is to integrate the most relevant contingencies on the relation-ship between change rhythm and performance into the research model. Prior studies have identified several contingencies as situational factors. To extend this view, this study adopts a path dependence approach (Cohen & Levinthal, 1990; Teece, Pisano, & Shuen, 1997) and integrates the interrelations between contingencies and an organization’s prior change history into the model. While this adds a dynamic dimension, the analysis has to be limited to a restricted period due to the availability of data. The third research objective is to add a dynamic dimension to the research model by including important contingencies on the relationship between change rhythms and performance, and by analyzing interrelationships over several years.

Finally, the model is applied to the empirical context of the European insurance industry as an example of a particularly dynamic industry to determine the usefulness of the model in ana-lyzing repeated strategic change and performance. The fourth research objective is to apply the developed model to the European insurance in-dustry to gain a comprehensive view on the relationship between change rhythms and per-formance in a turbulent empirical setting.

I.3 Model Development and Hypotheses Establishing and maintaining strategic alignment with the environment is not an easy task for organizations and their leaders. While the implementation of a single change is already char-acterized by a high degree of uncertainty, possible employee resistance, and high failure rates (Beer, Eisenstat, & Spector, 1990; Beer & Nohria, 2000; Kotter, 1996), this complexity is greatly enlarged when organizations implement multiple strategic changes in the course of time. The claim for studying repeated changes in organizations (Pettigrew, Woodman, & Cameron, 2001) has provided some evidence on the rhythm of organizational change (Sachs et al., 2006; Vermeulen & Barkema, 2002), but the research field still lacks large-scale empirical evidence for the performance outcome of different change rhythms. Existing studies on change rhythms have also not analyzed critical contingencies on the relationship between change rhythm and performance, such as financial resources or knowledge-related contingencies. This study addresses these shortcomings by using a temporal lens to analyze repeated strate-gic change. Based on an in-depth literature review, a comprehensive research model is estab-lished that captures the process of repeated change in organizations, as well as important con-tingencies on the relationship between change rhythms and performance.

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A first set of hypotheses deal with the question regarding how the change rhythm is associ-ated with long-term organizational performance. Based on prior findings that excessive change (Amburgey et al., 1993; Bouchikhi & Kimberly, 2003; Zajac, Kraatz, & Bresser, 2000) as well as long periods of stability (Hannan & Freeman, 1977; Nelson & Winter, 1982) are detrimental for organizations, the rhythm of change is proposed as a means to balance the conflicting forces of change and stability over time (Poole & Van de Ven, 1989). Existing studies on organizational change have identified several triggers of major change (Keck & Tushman, 1993; Mishina, Pollock, & Porac, 2004; Romanelli & Tushman, 1994; Virany, Tushman, & Romanelli, 1992). In order to extend this short-term view on change, this study integrates important contingencies on the relationship between change rhythm and per-formance. By adopting a path dependent view (Cohen & Levinthal, 1990; Koch, 2008), the author analyzes the interrelations between an organization’s prior change history and several contingencies. The same analysis is conducted for an organization’s stability history prior to major strategic change and different contingencies. Based on prior findings, financial re-sources in the form of available slack (Mishina et al., 2004) and performance crisis (Boeker, 1989; Levinthal & March, 1981) are integrated as contingencies into the model. Knowledge-related contingencies of CEO change and top management team turnover (Keck & Tushman, 1993; Virany et al., 1992) are also added to the model. To conclude, the author generates a comprehensive research model on strategic change rhythms and performance that is based on shortcomings identified in the change literature and combines evidence from the literature on strategic change and organizational learning. The model is distinguished from prior research by analyzing the direct relation between change rhythms and performance, thus adopting a view that focuses on the process as well as the out-come of repeated strategic change. In addition, the model extends prior research in that it studies important contingencies of the rhythm of change and performance, while taking into account the path-dependent nature of organizations.

I.4 Research Methodology This study uses a panel research design to study strategic changes over time. Due to the diffi-culties of obtaining reliable and valid primary data for organizational events that date back several years, secondary data (Churchill, 1999) was collected for this study. Strategic change events were coded from annual corporate reports, a data collection strategy often used in stud-ies on strategic change (Bowman, 1984; Lant, Milliken, & Batra, 1992; Romanelli & Tushman, 1994). Strategic changes were coded (Babbie, 2005; Van de Ven & Poole, 2000) at the corporate level in order to capture major changes that concern the whole organization. Detailed definitions and examples of several strategic change events were developed and the events were then coded as dummy variables. The research model was tested in the European insurance industry for the period 1995 to 2004. This decade constituted a phase of several external changes in the industry, such as de-regulation, consolidation waves, and the stock market crisis in 2000. The final sample con-sisted of 67 companies, which represented 56% of the full population of European insurance companies.

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In a first qualitative data analysis step, multiple event sequences of companies were compared by using an innovative methodology for multiple sequence alignment called ClustalW. The technique is widely used in the natural sciences, such as molecular biology, to compare or align event sequences. After the pre-clustering with the ClustalW program, the condensed data were clustered into different change rhythm categories based on suggestions by Van de Ven and Poole (2000). The resulting rhythm categories were then entered as dummies in the subsequent cross-sectional analysis of the relationship between change rhythms and perform-ance. In a final step, panel data analysis was applied to test the effect of important financial and knowledge-related contingencies on the relationship between change rhythms and per-formance. The data was analyzed with STATA/IC 10.0.

I.5 Structure of the Study The structure of this study is as follows. In Chapter II, a literature review on organizational change, change patterns and the rhythm of change is conducted. This review establishes the theoretical foundations of this study. In Chapter III, the author presents her criticism of the existing literature. This serves as a basis for the development of a comprehensive research model of the strategic change rhythm and performance, and the related hypotheses in the subsequent step. Chapter IV describes the research methodology by starting with the research orientation and then presenting the research design, variable measures, and the final sample. This is followed by a discussion of reliability and validity issues, as well as a brief explanation of the data analysis techniques applied in this study. Chapter V describes the findings of the empirical study that are divided into qualitative re-search findings, cross-sectional research findings, and findings from the panel data analysis. Afterwards, the research findings are discussed and interpreted with respect to the existing literature and the implications. Finally, Chapter VI summarizes the main findings and implications and discusses limitations of this study, along with suggestions for future research and concluding remarks.

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II. Literature Review

Explaining how and why organizations change has been a central and enduring quest of scholars in management and many other disciplines.

Van de Ven and Poole (1995: 510) In today’s global markets, change has become the rule rather than the exception. Ever-advancing technologies, legislative changes on deregulation of entire industries, or an increas-ing number of major catastrophes, such as natural and economic crises or terrorist attacks, are just examples of factors that force organizations to revise their strategic positioning with in-creasing pace and frequency. A major concern for managers is therefore how to adapt to changing environments most optimally. This concern has resulted in a substantial amount of studies in management literature that analyzed how organizations change, the stakes that are involved in change and the outcomes of such change. The increasing knowledge on organizational change has, however, resulted in different findings and controversial discussions on the causes, processes and consequences of change. This section provides an overview on the literature and includes important definitions, the findings of prior studies and the author’s criticism of existing literature. The section begins with an analysis and discussion of the phenomenon of change in the section Organizational Change: An Overview. It includes a discussion of the causes, results and types of organiza-tional change. In particular, it discusses short-term and long-term perspectives on change. This provides the basis for the section Timing of Organizational Change, including differ-ent concepts related to change timing, and the discussion of change timing versus change fre-quency. After this overview, the main Theoretical Perspectives on Organizational Change Patterns are discussed. While patterns of change are a broad categorization of the outcome of change timing in organizations, the Rhythm of Change is a sub-concept of change patterns that describes change in single organizational dimensions. The literature on the rhythm of change is discussed in the final section of this chapter. The insights gained from this literature review provide the theoretical basis for establishing a comprehensive research model of the rhythm of strategic change in chapter III.

II.1 Organizational Change: An Overview It is widely accepted in management literature that organizations have to adapt constantly to increasingly dynamic environments in order to survive (Chakravarthy, 1982; Greenwood & Hinings, 1996). Van de Ven and Poole (1995: 512) define organizational change as “an em-pirical observation of difference in form, quality, or state over time in an organizational en-tity. The entity may be an individual's job, a work group, an organizational strategy, a pro-gram, a product, or the overall organization.” Explaining how and why organizations change has been a central quest of researchers in management and other disciplines. Changes in or-

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ganizations can occur at multiple levels, such as the individual, team, or organizational level of analysis. For example, individuals in organizations undergo transitions in their jobs and careers when they are promoted to new positions. Changes at the group level can occur when new project teams are formed in order to work on a joint task. Changes at the organizational level can occur in different modes, such as innovation, mergers and acquisitions, reorganiza-tion, decline, new policies and work guidelines, changes in the organizational culture, or busi-ness process reengineering (Conner, 1993; Van De Ven & Poole, 1995). As change can occur in multiple modes and forms, it can result in different outcomes for organizations. Managers often justify major acquisitions or diversification decisions by underlining the need to adapt to changing environmental contingencies, such as exploring growth opportunities or responding to new competitors in their market. Researchers have also emphasized the draw-backs of change, underlining the risks and costs involved (Hannan & Freeman, 1984). This section provides a summary of the literature on the reasons and consequences of organ-izational change, as well as different types of change, and the analytical lenses of short-term and long-term views on change. It concludes with a criticism that provides the basis for a more detailed review of research on the temporal dimensions of change in section II.2.

II.1.1 Reasons for Organizational Change Prior studies have identified multiple reasons for organizational change that are summarized in Figure 1. Triggers for organizational change can be classified into external and internal changes. External causes for organizational change result from the higher complexity and turbulence in increasingly dynamic environments (Huber & Glick, 1995). According to contingency theo-rists, organizational survival depends on the degree of fit between organizations and their ex-ternal environments (Burns & Stalker, 1961). This fit is temporally destroyed when environ-ments are in flux, and organizations consequently initiate changes in order to adapt to the new external conditions. In particular, organizational change thus results from adaptation to rapid changes in the legal, political, or technical conditions that affect the basis of competition in an industry (Probst, 1992; Tushman, Newman, & Romanelli, 1986). For example, the deregula-tion of the European insurance industry in the 1990s with the aim to create a single European market for financial services created an unprecedented wave of mergers and acquisitions (M&As) among European financial institutions (Cummings & Weiss, 2004). Macroeconomic factors such as inflation, recession, and unemployment can also trigger organizational change (De Greene, 1982). An example is the worldwide financial crisis, which started with a finan-cial upset in 2007 and quickly mounted to an economic upheaval of global scale. It resulted in a wave of nationalization of companies that were unable to cope with the massive losses, such as AIG, then the world’s largest insurance group (Economist, 2008b), or Hypo Real Estate (HRE) bank in Germany. Companies across all industries initiated major cost-cutting pro-grams in response to falling consumer demand and rising losses (Economist, 2008a). In addi-tion, capital markets forced managers to meet short-term financial targets and quickly adapt to changing investor demands (Leana & Barry, 2000). If short-term targets are not met, compa-

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nies have to generate quick cost savings. These result in measures such as outsourcing nones-sential processes, downsizing personnel, and minimizing the number of core employees. Internal causes for change stem from internal organizational dynamics (De Greene, 1982). Change is initiated when the organizational structure becomes obsolescent, which can have many reasons. First, internal communication may fail to keep up with the growth, diversifica-tion, and integration of acquired organizations. This might result in a change towards informal communication structures within an organization. Second, management practices to maintain power structures can become obsolescent when top management makes decisions, such as a major acquisition, out of pure pride or arrogance, without strong strategic reasoning. The am-bition of the erstwhile CEO of Daimler (formerly DaimlerChrysler), Jürgen Schrempp, to build a “World Inc.” company by expensively acquiring Chrysler, Mitsubishi, Hyundai and several U.S. commercial vehicle manufacturers from 1998 onwards is a good example (Probst & Raisch, 2005). This behavior, driven by wanting to maintain power, resulted in extreme complexities, difficult integration processes, million dollar losses, and ultimately a series of restructuring programs. Third, the entire organizational climate may change when employees lose the conviction that top management will adequately respond to new environmental threats. An example is a badly performing company that has become an acquisition target in which employees might lose trust in the organizational ability to compete successfully in the future. An organizational climate of hopelessness and fear can consequently permeate the organization (De Greene, 1982). In addition, a performance crisis can cause organizational change. Poor performance triggers problem-driven searches that incite managers to scan their environments in order to identify reasons for decline (Cyert & March, 1963; Haleblian, Kim, & Rajagopalan, 2006; Levinthal & March, 1981). Therefore, poor performance can break the grip of inertia and initiate major change (Boeker, 1989; Tushman & Romanelli, 1985).

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Figure 1: Reasons and Consequences of Organizational Change

II.1.2 Results of Organizational Change Organizational change can have positive as well as negative outcomes. In the remainder of this section, both types of change outcomes are reviewed with respect to prior studies.

Positive outcomes of change relate to an organization being aligned better with its environ-ment, thus increasing fit (Burns & Stalker, 1961; Mohrman, Mohrman, Ledford, Cummings, Lawler III, & Associates, 1989) and reinforcing its market position. Growth through mergers and acquisitions enables an organization to achieve a high growth rate quickly (Beitel, Schiereck, & Wahrenburg, 2004; Mueller-Stewens & Lechner, 2005), which might attract additional investors and result in higher stock prices. In addition, changes such as restructur-ings can help organizations stop declining performance (Schmitt, 2009). Change in organiza-tional processes, such as the implementation of total quality management processes, can also enhance efficiency and improve the competitiveness of an organization (Conner, 1993). Simi-larly, organizational adaptation theorists have espoused the adaptive value of organizational changes, thus implying possible improvements in organizational survival rates and perform-ance (Cyert & March, 1963; Lant & Mezias, 1990; Levinthal & March, 1981).

Despite the apparent benefits of organizational change, many scholars have underlined the inherent challenges and risks involved in change. A reported failure rate of around 70% of all initiated change programs (Balogun & Hope Hailey, 2004; Beer & Nohria, 2000) exemplifies that few companies manage the change process as efficiently as they would like (Beer & Nohria, 2000).

Organizational change creates a major cost burden for an organization and involves risks due to its uncertain outcomes (Greve, 1998) and the – at least temporary – disruption of existing practices (Biggart, 1977). Organizational change often necessitates breaking up solidified power structures (Pfeffer, 1981) in such an organization. However, established roles and for-mal organizational rules can only seldom be changed swiftly (Amburgey, Kelly, & Barnett,

REASONS FOR CHANGE

Environmental changes: - Legal conditions - Political conditions - Technical conditions - Macro-economic factors - Capital market’s demands

Internal changes: - Failed communication struc-

ture - Power structures and pride - Negative organizational

climate - Performance crisis

ORGANIZATIONAL

CHANGE

CONSEQUENCES OF

CHANGE

Beneficial outcomes: - Increased fit - Enhanced growth - Increased efficiency

Detrimental outcomes:- Increased costs - Enhanced risk and uncer-

tainty - Employee resistance

(stress, frustration, burnout, sabotage)

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1993; Hannan & Freeman, 1977; McNeil & Thompson, 1971; Stinchcombe, 1965; Tsouderos, 1955), resulting in difficulties with adaptation. Change can destroy relationships between employees who work together effectively. This can erode an organization’s competitive advantage, which is difficult to imitate (Barney, 1991). Scholars have argued that rapid, frequent, or unpredictable change can threaten the motivation of employees (Leana & Barry, 2000; Leana & Van Buren, 1999). Rapid change can also threaten the ability of employees to achieve successful collective action, which constitutes an organization’s social capital. Consequently, employees often oppose change (Coch & French, 1948) and show enhanced resistance to it (Coch & French, 1948; Ford, Ford, & D'Amelio, 2008; Kotter, 1995; Lines, 2004). When studying multiple change initiatives over time, Abrahamson (2000) found change fa-tigue among employees. This is defined as the disorientation of individuals as a result of too much stimulation. He suggested that change fatigue would result in an overload of change initiatives, organizational chaos and increased resistance to change. As for middle managers, change fatigue became apparent through their resistance towards change that had been initi-ated by senior management of young movers in an organization. Similarly, Stensaker et al. (2002) studied excessive change, defined as a situation when an organization either pursues several changes simultaneously, or when new changes are introduced before the previous change has been completed and evaluated. The authors found that especially middle managers and employees on lower hierarchical levels experience symptoms such as stress, frustration and job dissatisfaction in times of excessive change. This could result in different coping mechanisms, such as exiting the organization, sabotaging change initiatives, or difficulties with performing even routine tasks that have previously been managed. The performance con-sequences of these reactions could result in failure to implement change successfully if the negative symptoms occur during the change process. If the organization undergoes frequent change, its effectiveness might be reduced constantly.

II.1.3 Perspectives on Organizational Change Organizational change, whether triggered by internal or external factors, comes in all shapes, forms and sizes (Balogun & Hope Hailey 2004; Burnes 2004; Carnall 2003; Kotter 1996; Luecke 2003). According to Mohrman et al. (1989), several types of change can occur, de-pending on the organizational domain. First, strategic changes include mergers and acquisi-tions that grow or consolidate a market. Second, structural changes can include a change from a centralized organizational structure to a more decentralized one. Third, process-related changes might involve an increased degree of automation in production through using more efficient machines. Fourth, functional changes occur along the organization’s value chain, such as in research and development when companies invest in research to become more in-novative, or in human resources, when personnel are laid off to reduce costs. Changes can also be classified according to their magnitude. The dichotomy of high and low magnitude changes has been described extensively in the literature, through a multitude of terms and concepts (e.g., Greiner, 1972; Weick & Quinn, 1999).

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On the one hand, first-order changes are described as incremental adjustments that result in variations of products, structures, and processes (Bateson, 1972; Watzlawick, Weakland, & Fisch, 1974). In addition, Burnes (2004a) refers to incremental change as a state when indi-vidual parts of an organization deal increasingly and separately with one problem and one objective at a time. The distinctive quality of continuous change is that small continuous ad-justments, created simultaneously across units, can cumulate and create substantial change (Weick & Quinn, 1999). Additionally, “when interdependencies loosen, these same continu-ous adjustments, now confined to smaller units, remain important as pockets of innovation that may prove appropriate in future environments.” (Weick & Quinn, 1999: 375). Related concepts include single-loop learning (Argyris & Schön, 1978), evolutionary change (Romanelli & Tushman, 1994) or convergent change. (Tushman & Romanelli, 1985). Periods of convergent change “elaborate structures, systems, controls, and resources toward in-creased coalignment” (Tushman & Romanelli, 1985: 173). Convergent change represents the fine-tuning of an existing orientation (Greenwood & Hinings, 1996; Weick & Quinn, 1999). While this type of change can lead to a short-term improved internal consistency and effec-tiveness, it can increase organizational complacency and momentum and can therefore hinder adaptation to environmental changes in the long run (Tushman et al., 1986). One the other hand, discontinuous or second-order change is unpredictable change that breaks with past assumptions and leads to a transformation of the fundamental characteristics of the organization (Bateson, 1972; Meyer, Brooks, & Goes, 1990; Watzlawick et al., 1974). Re-lated concepts include transformations (Mohrman et al., 1989), double-loop learning (Argyris & Schön, 1978), major or radical change (Amis, Slack, & Hinings, 2004; Greenwood & Hin-ings, 1996; Wischnevsky & Damanpour, 2006) and revolutionary change (Gersick, 1991; Miller, 1982). In addition, Mohman et al. (1989) define large-scale organizational change as a lasting change in the character of an organization that significantly changes its performance. A change in an organization’s character necessitates changes in its design and processes. Or-ganizational design includes strategies, structures, configurations of technology, formal in-formation systems, decision-making systems, and human resource systems. Organizational process refers to organizational behaviour and information flows, including communication, decision-making, participation, cooperation, conflict, politics, and the flow of material. Miller (1987) also defines organizational change in strategy and structure with respect to an organi-zation’s environment. Under such an environmental imperative, change can be major or mi-nor, depending on the nature of external shifts. A synonym for discontinuous change is radical change (Gordon, Stewart, Sweo, & Luker, 2000; Grinyer & McKiernan, 1990; Huy, 2001), which involves the transformation of an organization (Greenwood & Hinings, 1996). This type of change has also been termed revolutionary change, i.e., event-triggered change. Due to the postulated interdependence of organizational domains, this encompasses the “radical and discontinuous change of all or most organizational activities”. Five domains of organiza-tional activities are considered important to survival: Strategy, structure, power distributions, culture, and control systems (Romanelli & Tushman, 1994; Tushman & Romanelli, 1985). Revolutionary change occurs as fundamental transformation, i.e., as “radical, brief, and per-vasive change” (Romanelli & Tushman, 1994: 1143). Revolutionary change is thus defined in terms of scale as well as pace (Greenwood & Hinings, 1996). Conversely, more recent re-

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search has shown that changes in multiple organizational activities do not necessarily occur simultaneously, but as single events (Nickerson & Zenger, 2002; Sabherwal, Hirschheim, & Goles, 2001). Finally, the process of organizational change can be studied through a short-term or long-term analytical lens. A short-term view on change focuses on single change events, such as an ac-quisition, its underlying processes, and its outcomes. Conversely, if change is analyzed with a long-term view, multiple organizational changes are studied over time, including their interac-tions and the long-term outcome. Early studies in the field of change management analyzed change with respect to single events or few changes over time. Lewin’s (1947) three-step change model marked the starting point for process-related research on change and development. Lewin (1947) proposed a change model on single organizational changes with the process of unfreeze, change, and refreeze. He believed that the stability of human behavior was based on a quasi-stationary equilibrium that was supported by a complex field of driving and restraining forces (Burnes, 2004b). In a first step, this equilibrium needs to be destabilized (unfrozen) before old behavior can be unlearnt and new behavior can be adopted (Lewin, 1947). In the second step, all the forces at work should be taken into account to identify and evaluate all the available options on a trial and error basis (action research approach). Through such an iterative process of research, action and more research, groups and individuals can move from a less acceptable to a more accept-able set of behaviors. In the third step, refreezing aims at stabilizing the group at a new quasi-stationary equilibrium. Over the past 20 years, Lewin’s approach received major criticism that it is related to the as-sumption that organizations operate in a stable state, that his three-step approach was only suitable for small-scale changes and ignored organizational power and politics, and that it was top-down and management driven (Burnes, 2004b). While Lewin’s approach governed organ-izational development initiatives through the 1970s, when the pace of change was minor to moderate, his model lost prominence in the 1980s, due to the sudden acceleration of the pace of change in organizations and their environments. Some scholars, such as Judson (1991), Kanter (1992), Strebel (1994), Kotter (1995), and Galpin (1996), continued studying single change processes and provided frameworks for the successful implementation of single changes4, while others adopted a more long-term view on change (By, 2005). In subsequent studies, scholars have examined whether change occurs in an episodic (Miller, 1990; Romanelli & Tushman, 1994) or continuous way (Orlikowski, 1996; Tsoukas & Chia, 2002; Weick & Quinn, 1999). These studies are strongly related to the timing of organiza-tional change. As such a temporal approach on change constitutes a major foundation for this research positioning, key concepts relating to the timing of change are reviewed in the next chapter. 4 The analysis of single change processes is not the focus of the present study, but an analysis of repeated

changes is conducted instead. The mentioned theories are less relevant to this study and are thus not reviewed in detail.

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II.1.4 Conclusion and Criticism A review of the literature on organizational change revealed that change can occur for multi-ple reasons and in multiple shapes and forms, resulting in different outcomes. While the in-creasing variety of perspectives on change improves insights on the phenomenon and its un-derlying processes and outcomes, this variety also implies major disadvantages to the research field. A particular criticism on the change literature relates to the emergence of too many terms, definitions, and concepts that make it difficult to compare the findings of change stud-ies. Therefore, it is indispensable for researchers to define the concept of change analyzed in their studies with respect to prior approaches and definitions. A definition of the concrete type of change studied in this research is provided in chapter II.4, after reviewing important aspects of the timing of change. The timing of change is related to the description of the two analytical lenses described in this section. First, a short-term view on change is concerned with the timing of a single change with respect to events such as ex-ternal change triggers or competitors’ moves. Conversely, a long-term view on change relates to the analysis of multiple changes over time. Researchers with such an analytical lens are interested in the timing of one change in relation to multiple other changes in the organiza-tion. They are also interested in the timing of change in relation to external and internal trig-gers of change. Therefore, a long-term analytical lens on change captures a longer history of actions in organizations. Furthermore, it relates better to an organization’s challenges of adapting to dynamic environments in the long run. The present study therefore adapts a long-term analytical lens on change. Building on this, important concepts related to the timing of organizational change are reviewed in the next section.

II.2 Timing of Organizational Change

Music without pauses is an endless rush of noise.

(Martin & Kimberly, 2008: 27) Most studies that examine the organizational change process as a single event, recommend several phases that organizational leaders and change agents should follow in order to imple-ment change successfully (Galpin, 1996; Kotter, 1995; Lewin, 1947). Moreover, many studies in this field center on questions of how organizational members experience change as it un-folds (Isabella, 1990; Jaffe, Scott, & Tobe, 1994), and how employees react to the resulting change (Beer, Eisenstat, & Spector, 1990; Kotter, 1995; Lines, 2004; Strebel, 1996). Despite the invaluable findings of these studies, recent change literature focused on the analy-sis of series of changes over time rather than single transformational events. Switching the focus from an analysis of single change events to multiple changes raises additional complex-ity in the research process. The abovementioned quote of Martin and Kimberly (2008) is an analogy for the fact that one cannot just combine a series of changes in organizations without considering the sequential balancing of change with stability in the organization. In this re-spect, Webb and Pettigrew (1999) argue that dealing with multiple and interrelated changes, a

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process which often occurs in parallel or in sequence, is one of the main challenges in change management. The study at hand follows this tendency and intends to analyze the process of multiple changes in strategy over time. Consequently, the additional complexity involved in a study of multiple changes is addressed in this chapter before the theoretical foundation of the resulting change patterns is described in Chapter II.3. Scholars have argued that the moment when changes occur in a sequence, i.e., the timing of change, may explain long-term performance (Abrahamson, 2000; Huy, 2001). For example, Gersick (1994) argues that paying close attention to time in organizational evolution is criti-cal, as managerial choices between persistence and change are particularly painful when man-agers have little experience and a limited amount of time to ‘wait and see.’ Hambrick and D’Aveni (1988), who compared major bankruptcies and surviving companies during the pe-riod 1972 to 1982, found that while both types of companies tended to engage in the same average number of new domain entries, the bankrupt companies showed excessive change behavior prior to failure, i.e., either too much or too little. Thus, while organizations may have the same number of change over a specific period, they can differ in the timing of those changes (Vermeulen & Barkema, 2002). Besides analyzing the total amount of change (how much change?), an analysis of the timing of such changes (when to change?) is important.

The following section begins with a review of the dimensions of the timing of organizational change. These consist of the rate or pace of change, the sequence of changes, entrainment, and the rhythm of change. It then discusses the difference between the timing and frequency of change, and concludes with a discussion of the major criticisms.

II.2.1 Definitions and Key Concepts Related to Timing of Change According to Huy (2001: 613), the timing of change describes the moment when each change occurs in a sequence of changes. He states that “good timing captures the windows of oppor-tunity in which an intervention could benefit from better receptivity to change and more boun-tiful resources. […] Redistributing events allows [change] agents to balance the organiza-tion’s change load and sustain its capacity to change. […] Hence, timing an intervention type with its typical pacing in a sequence of multiple types is critical to its effectiveness.” The timing of change has been emphasized since the early work of Hannan and Freeman (1984). These authors highlight the importance of the timing of changes for the analysis of change in populations of organizations that involves three issues. First, information is needed on the temporal pattern of changes in key environments. Such information includes evidence of whether changes are small or large, rapid or slow, and regular or irregular. Second, infor-mation on the speed of learning about environments is required, and third, the speed of the responsiveness of an organizational structure should be evaluated. Gersick (1994) argued that closer attention to time in organizational evolution is critical, as managerial choices between persistence and change are particularly painful when managers have little experience to help them interpret the seriousness of obstacles and limited time to ‘wait and see.’ In order to interpret the full complexity of decisions regarding change, manag-