The Impact of Socialist Imprinting and Search for Knowledge on Resource Change: An Empirical Study of Firms in Lithuania

Abstract

In this paper we examine how firms change their resources in response to exogenous shocks in their business environment. Building on core ideas from the literatures on organizational imprinting and firm resources, we suggest that founding conditions differentially imprint firm resources. These initial imprinting differentials in turn influence the search for knowledge required to adapt or change firm resources in the face of external change in their business environment. We also suggest that the level of imprinting and the location of search independently and jointly influence the success with which firms are able to change their resources. We use survey-based data from a set of firms in Central Europe that experienced an exogenous shock in 1989-1991 to test our arguments. We develop a measure of pre-shock imprinting (called socialist imprinting) on resources and use it to predict where firms will search for knowledge to undertake change in the post-shock period and how successful that change will be. We find that the level of socialist imprinting influences the search location for knowledge to change key resources and activities following the shock. In terms of the success of change undertaken, we see that distant search for knowledge is positively linked to it. We also observe that the level of imprinting and search location jointly impact the success of change; for resources with higher socialist imprinting, distant search was more effective than local search. This research makes three important contributions in the context of existing research on organizational imprinting and firm level change. One, it focuses on firm-level resources to examine the impact of imprinting. Two, we examine how differences in resource level imprinting influence the search for new knowledge required to transform these resources. Three, we demonstrate that the interaction between the level of imprinting and the nature of search has important influences on firm performance. Our findings also provide insights to practitioners and policy makers who deal with firms in transitional economies. Practitioners can better understand how to undertake firm level change more effectively in the context of sudden exogenous shock. For policy makers, both of domestic and international institutions, understanding the change process can help formulate assistance programs more effectively.