Changes In Organizational Form Research Articles

Designing management control in hybrid organizations: The role of path creation and morphogenesis

Path-creating change in organizational form is proposed as an important element in achieving management control in hybrid organizations. Using case examples from large-scale projects in the architectural, engineering, and construction industry, as well as from joint ventures in the oil and gas industry, we highlight the role of mindfully synthesizing new organizational forms in the design of management control systems. A series of paradoxes is disclosed, in which attempts to achieve control through mimetic adoption of established management control techniques lead to reduced control. On the other hand, path-creating deviations from institutionalized practices, resulted in improved project and venture performance. It has been argued that the design of inter-organizational management control systems seeks to enable organizations to compete for resources and efficiency, and also to obtain institutional legitimacy. Institutional theory proposes that isomorphism permits organizations to obtain that legitimacy and explains their design. In this paper, we propose that path creation and morphogenesis, which deviates from isomorphism, is an additional consideration in explaining management control system design.

Value Creation by Diversified Firms Over Time

The diversification discount is widely attributed to inefficient cross-subsidization of projects, and interpreted as evidence of value destruction in diversified firms. However, most empirical research has focused on a static comparison of firm values at a particular point in time or has examined changes in firm values surrounding changes in organizational form rather than comparing the dynamic performance of diversified and focused firms over time. We investigate changes in firm excess value, conditioned on organizational form, enabling us to differentiate between a risk or cash flow-based explanation and one based on rational learning or behavioral biases. We find that the annual change in firm excess value is 3% higher for diversified firms (7% higher after controlling for endogeneity via instrumental variables) both in a sample comparable to the previous literature and in an expanded sample from 1978-2005. Moreover, diversified firms consistently create more value than their focused firm rivals across all phases of the business cycle with larger gains in expansionary periods. Inefficient cross-subsidization alone can explain the level of the diversification discount, but not the changes to it that we document. We show that a diversification discount and larger changes in diversified firm value are consistent with rational learning models or investor behavioral biases.

Ringing the Bell on the NYSE: Might a Nonprofit Stock Exchange Have Been Efficient?

This spring the New York Stock Exchange, Inc. (NYSE) completed an historic restructuring. On March 7, 2006, the NYSE completed its merger with Archipelago Holdings Inc. (Archipelago), a publicly traded trading platform. As a result, the old NYSE itself will become the New York Stock Exchange LLC, a wholly owned subsidiary of NYSE Group, Inc. (NYSE Group). The former members, or seat holders, of the NYSE will receive one of three forms of consideration: all cash, all stock in NYSE Group, or a package of cash and stock. Then, NYSE Group will allow those former members to offer their shares to the public in a secondary offering.Because the NYSE was a not-for-profit corporation, the merger was also a change in organizational form. The change from nonprofit to for-profit, or demutualization, has mostly been viewed as a long-overdue response to new, on-line competition from electronic communications networks (ECN's). But there has been little assessment of the strengths or efficiencies of the nonprofit form of the exchange. This paper presents the possibility that the NYSE's choice of form was an efficient solution to a classic lemons problem, in which misinformation from bad issuing firms (firms whose shares trade on the exchange) could drive out good issuing firms. We apply a robust theory of nonprofits in which the highest demanding consumers of a nonrival good organize the production of that good. In this case, investment bankers and other financial intermediaries organize to produce liquidity. The resulting nonprofit is the former NYSE, which was able to align issuing firms' incentives to disclose with those of investors. Banker-owners of the NYSE acted as gatekeepers to the exchange, screening issuing firms through an extensive due diligence process, providing capital via underwriting, and connecting issuing firm insiders to one another via initial public offering (IPO) allocations. Over a period of many decades this system maintained an equilibrium in which issuing firms, big and small investors, and exchange members could participate with relative ease, transparency and fairness in the exchange. The shift to a for-profit corporation will have a significant, and potentially deleterious, impact on this equilibrium as it breaks up the longstanding components of the nonprofit system.

Financial Leverage and Bargaining Power With Suppliers: Evidence from Leveraged Buyouts

This paper investigates whether leveraged buyouts (LBOs) increase the bargaining power of firms with their suppliers. We find that suppliers to LBO firms experience significantly negative abnormal returns at the announcements of downstream LBOs. We also find that suppliers who have likely made substantial relationship-specific investments are more negatively affected, both in terms of abnormal stock returns and reduced profit margins, than suppliers of commodity products or transitory suppliers. Interestingly, leveraged recapitalization announcements are not associated with negative returns to suppliers, suggesting that increased leverage without an accompanying change in organizational form does not, on average, lead to price concessions from suppliers.

What motivates managers?: Evidence from organizational form changes

We formulate and test several hypotheses on managerial motivation using organizational form changes in the real estate industry. We find that firms that switch to a more restrictive structure have increases in stock value and managerial ownership. Firms moving to a less restrictive structure have larger wealth effects when higher monitoring exists. Higher degree of financial distress and forced CEO replacement at the time of organizational form change are taken to be proxies for higher degree of (creditor) monitoring. The wealth effects are decreasing in the firm's level of free cash flow at the time of organizational form change.

Social comparison in virtual work environments: An examination of contemporary referent selection

The current trend with organizations is to streamline operations, cut cost, and operate with fewer employees (i.e., to do more with less). This trend has encouraged events such as downsizing and mergers as well as fostered the development of virtual work environments and new organizational forms like virtual organizations. Consequently, this change in organizational forms and the context of work has the potential to cause other associated consequences. One possible consequence is a change in the availability and type of referent others available. Likewise, a better understanding of worker referent choice remains a common issue of debate among researchers of comparison theories. This paper examines how referent selection relative to worker social comparison is (and will be) affected by the changing nature of organizations and the context of work.

An empirical investigation of the effects of downsizing on buyer–seller relationships

To survive in today's highly competitive markets, many firms are initiating fundamental changes in organizational form and practice. These restructuring efforts are having significant effects on the organization and management of work within customer firms. However, these important changes have been largely ignored in the extant marketing literature. The research presented here represents an early step toward addressing this important gap in the literature. To that end, this paper examines the effect of ‘buyer firm downsizing’ on buying firm structure and buyer–seller relationships. The reported findings support several of the proposed hypotheses related to the effects of downsizing.

The Effects of Downsizing on Organizational Buying Behavior: An Empirical Investigation

To survive in today’s highly competitive markets, many firms are initiating fundamental changes in organizational form and practice. These restructuring efforts are having significant effects on the organization and management of work within customer firms. However, these important changes have been largely ignored in the extant marketing literature. The research presented in this article first describes a general theory of the effects of organizational downsizing. Then, it examines the potential effects of downsizing on buying center structure and purchase participant characteristics. Findings support several of the hypotheses related to the proposed effects of organizational downsizing on the outcome variables of interest.

The determinants of organizational form changes: evidence and implications from real estate

We study changes in the real estate industry among organizational forms with varying degrees of restrictiveness and document the associated changes in profitability, free cash flow, debt, dividends, and investment policies. All troubled firms in our sample move to a more flexible organizational structure, with subsequent reductions in dividends, improvements in performance, and increases in asset sales and investments. Healthy firms that move to a tighter structure have larger free cash flows before the change; they increase dividends, reduce free cash flows and improve profitability after the change. We document evidence of tax considerations in organizational changes.

How Much Do Taxes Discourage Incorporation?

One of the most basic distortions created by the double taxation of corporate income is the disincentive to incorporate. In this paper, we investigate the extent to which the aggregate allocation of assets and taxable income in the U.S. between corporate vs. noncorporate forms of organization during the period 1959-86 has responded to the size of the tax distortion discouraging firms from incorporating. In theory, profitable firms should shift out of the corporate sector when the tax distortion to incorporating is larger, and conversely for firms with tax losses. Our empirical results provide strong support for these theoretical forecasts, and hold consistently across a wide variety of specifications and measures of the tax variables. Measured effects are small, however, throwing doubt on the economic importance of tax-induced changes in organizational form.

Professionalization of Women's Health Groups in Sao Paulo: The Troublesome Road towards Organizational Diversity

This article gives an overview of the origins and characteristics of the women's health movement in Sao Paulo as a specific example of a social movement. It focuses, in particular, on its organizational diversity which includes, but is not restricted to, differences between professionalized and non-professionalized organizations. In this respect, three questions seem important: (1) what happens to the potential of social movements when they become dependent for funding on mainstream institutions such as foundations and international aid agencies; and more interestingly for organizational research, how do changes in organizational forms and practices such as formalization and professionalization impinge upon (2) the solidarity and collective identity of these groups and (3) the way they bring change about? In broader terms, this article wishes to promote an understanding of social movement fields as plural, organizationally and otherwise. It points to the advantages of this organizational diversity, as well as to the problems and tensions it brings about.

Complexity, organization, and Stuart Kauffman's The Origins of Order

The economics of organization asks why we observe the organizational variety we do, why that observed variety is only a subset of all possible organization types, and how organizational forms change. This review essay evaluates Stuart Kauffman's NK models from the complexity sciences for investigating these questions. Such models focus on the statistical properties of complex systems that allow us to examine the total ensemble of organization types, which types are ‘neighbors’ of which other types, and the pattern of change in organizational forms, as well as situations where the interactions among the relevant elements or the dynamic characteristics of the system are unknown.

Changes in Organizational Structure and Shareholder Wealth: The Case of Limited Partnerships

This paper analyzes the consequence for shareholders of a change in organizational form, the conversion of a corporation, or the spin-off of a unit into a limited partnership. Theory suggests that, prior to the Tax Reform Act of 1986, the tax benefits of conversion to a limited partnership and the creation of a new entity separate from the parent corporation should have a positive effect on shareholder wealth. On the other hand, the increase in agency costs of such an organizational change should decrease the wealth of shareholders. Empirical results lend support to hypotheses that predict an increase in stock price at the announcement of the conversion, but cannot identify the source of the gain.

Urban Chinese Social Organization: Some Unexplored Aspects in Huiguan Development in Singapore, 1900–1941

Immigrant associations known commonly ashuiguanhave long been a research area among specialists on the Overseas Chinese. Recently, the same subject has attracted increasing attention among scholars who attempt to examine urban life in late imperial China. In either case, the existing historical literature seems to have focused on the two following aspects of huiguan development: the various principles of organizational formation such as common native place, surname, occupation and the new locational identity, and how they interacted with one another and shaped the community structure; the functional relevance of huiguan firstly to the various needs of the immigrant society and the local elite, and secondly to the overriding concerns of the ruling authority, be it the Chinese imperial bureaucracy or the governing authorities in a foreign settlement. Yet few attempts have been made to delineate the longitudinal evolution of these associations over an extended period in any single locale, and above all, to provide an analytical framework to decipher the complex interplay of different forces behind organizational changes. Relying primarily on Chinese newspapers, huiguan archives and publications in Singapore,3 this paper represents a very preliminary effort along both lines. After a brief background discussion on the nineteenth century, I will try to document closely several significant features in the development of Chinese huiguan in Singapore between the turn of the century and the beginning of the Pacific War. The main thrust here is to demonstrate the possibility of going beyond number games, that pay too much attention to organizational inventory, to examine more substantive issues such as changes in organizational forms, the revamping of institutional set-ups, leadership turnover and varying functional priorities. Then the following section will seek to account for these organizational metamorphoses. It will be argued that our explanatory paradigm should at least consist of three categories of factors: domestic forces associated with community evolution; the impact of the host society; and influences emanating from China and particularly the native area.

Consolidating corporate control

Dual-class recapitalizations and leveraged buyouts have similar effects on ownership of corporate voting rights but very different effects on ownership of residual claims. We predict that firms with greater growth opportunities, lower agency costs, and lower tax liability are more likely to consolidate control through dual-class recapitalizations. We find strong support for the growth hypothesis and weaker support for the other hypotheses. These results increase our understanding of the causes of change in organizational form by illustrating that the method and effects of consolidating corporate control are systematically related to firm attributes.

An end to social movements? Introductory paper to the sessions on “new movements and change in organizational forms”

An end to social movements? Introductory paper to the sessions on “new movements and change in organizational forms”

Bureaucratic Organization: Selective or Saturative

A psychodynamic analysis of the selective character of traditional organizations(1) Anglo-American governmental agencies, (2) the Roman Catholic church, and (3) the armed services-suggests that our precedents do not imply any single superior form and that the critical basis of analysis of an organizational form changes as we move from a selective to a saturative use of it.1 With a bias toward political democracy, we suggest that private practice is one form suited to the mature role sought by most citizens. Finally, we conclude that diversity of form need not preclude valid generalization but that generalizations, to be universal, must be drawn from universal human experience rather than from selective sources. The author took his Ph.D. in political science at Harvard after several years of administrative experience. He is now lecturer in research methods in the Graduate School of Social Work, University of Washington.