Emerging Markets Go Organic: Does Organizational Culture Impact Market Responsiveness and Firm Performance?

Abstract

The study of organizational culture has seen a resurgence lately in several management subfi elds. A recent study by Susan Wei (Texas AM they seem to nurture those who innovate and collaborate well together. Contrast this with mechanistic organizations that stress formality, structure, and standardization in their operations. These organization features have their place and yield great value as well when they are aligned with less dynamic conditions more typical of developed markets. But in fast-paced, unstable markets such as China, fl exibility and more dispersed decision control toward matters external to the fi rm (adhocracy culture) or internal to the fi rm (clan culture) should produce greater market responsiveness. In short, Wei and her colleagues believe that organic cultures are a relevant and important strategic resource for emerging-market fi rms. This is important because the prevailing wisdom is that competitiveness is driven by other market-based factors such as low labor costs, cheaper raw materials, and fewer business restrictions. While this is likely true, Wei and her colleagues suggest that the fi t of the organizational culture to market conditions can produce a competitive advantage and should not be overlooked. In part this is because organic cultures, much more so than mechanistic cultures, can turn on a dime in unpredictable emerging economies. Interestingly, however, the two types of organic cultures (adhocracy and clan) by themselves may improve fi rm responsiveness to market conditions, while in combination they may actually decrease responsiveness. Likewise, an organic culture may act differently in various industries within emerging markets. For instance, a high-tech company may capitalize on the benefi ts offered by fl exibility and innovation that go hand-in-hand with the externally focused adhocracy (e.g., Alibaba in China), whereas low-tech industries might be more competitive if they have an internally focused clan-type organic culture (e.g., Haier appliances).