Customer:
Zien, K. A. & Buckler, S. A. (1997). Dreams to market: Crafting a culture of innovation. The Journal of Product Innovation Management, 14(4): 274-288.
Customer intimacy is one of the key principles for innovation in a firm.
Shepherd, D. A. & Zacharakis, A. (2003). A new venture’s cognitive legitimacy: An assessment by customers. Journal of Small Business Management, 41(2): 148-167.
For new ventures (young firms) customers appears to be an important contingency on three primary dimensions: product development, organizational process, and management.
McGowan, P.; Durkin, M. G.; Allen, L.; Dougan, C. & Nixon, S. (2001). Developing competencies in the entrepreneurial small firm for use of the internet in the management of customer relationships. Journal of European Industrial Training, 45: 126-136.
Customer is suggested as the primary focus of an entrepreneurial firm. An entrepreneurial firm can experience a competitive advantage when it effectively organized to build and maintain intimate customer relationship. A relationship where customer are more than just receivers of the firm’s outputs and increasingly becomes more like “co-producers”. According to Ravald and Gronroos (1996), such relationship where customers become an active participant becomes an invaluable resource in the firm’s new product development and innovative activity.
DeCarlo, J. F. & Lyons, P. R. (1986). Toward a contingency theory of entrepreneurship. Journal of Small Business Management, 18: 37-42.
Entrepreneurship research that focus on the stages of development of the firm has great practical implication. It is then important to identify contingencies that are significantly present during each state. Contingency research in entrepreneurial firms will make significant contributions to entrepreneurial research and practice.
Negandhi, A.R. & Reimann, B. C. (1986). A contingency theory of organization re-examined in the context of a developing country. Academy of Management Journal, 15: 137-146.
Formalization is negatively related to the degree of instability and/or uncertainty of the market and the environment (Lawrence and Lorsch, 1967). They also found that the successful firms operating in dynamic environment tended to be decentralized and those that face stable environment tended to be centralized. Furthermore, they proposed that centralization under dynamic environmental conditions and decentralization under stable environmental conditions are dysfunctional.
(The purpose of this study is to test structure customer input uncertainty contingency in the context of young growing firms)
Miles, M. P.; Covin, J. G. & Heeley, M. B. (2000). The relationship between environmental dynamism and small firm structure, strategy, and performance. Journal of Marketing Theory and Practice, 8(2): 63-78.
Found that environmental dynamism moderates the relationships between organization structure and firm performance.
Most empirical studies of environmental dynamism have been based on samples of medium-to-large firms. Relatively little is known about how small firms structurally respond to environmental dynamism. Also, the few studies that have directly examined environmental dynamism’s impact on small firm processes and outcomes can best be regarded as tentative.
Small and young firm management is often fundamentally different from large firm management (Cohn and Lindberg, 1972), the empirical findings of contingency relationships that are mainly based on based on large firms may not be pertinent in the small firm context.
Therefore, this study is in response to several calls (Ireland and Van Auken, 1987 ? ) for more small firms research on strategic issues.
The environmental dynamism (uncertainty) bars organizations to accurately predict organizational context and structure that stresses formalization and centralization can be dysfunctional.
Despite considerable evidence of environmental uncertainty and organic structure in large firms, it’s not all clear that the previously described relationships between structure and environmental contingencies actually occurs in young firms.
Call – researchers could examine the influence of environmental complexity on the structural arrangements of small firms.
Matsuno, K.; Mentzer, J. T. & Ozsomer, A. (2002). The effects of entrepreneurial proclivity and market orientation on business performance. Journal of Marketing, 66(3): 18-33.
This study investigated the structural influence of entrepreneurial proclivity and market orientation on business performance.
Entrepreneurial firms are often characterized by a centralized vision and strong leadership. Hence, the study propose that centralization and formalization are instrumental in effective implementation of entrepreneurial vision and strategy.
Caruana, A.; Morris, M. H. & Vella, A. J. (1998). The effect of centralization and formalization on entrepreneurship in export firms. Journal of Small Business Management, 36(1): 16-29.
This study found that an increased level of centralization limits entrepreneurial behavior and an increased level of formalization enhances entrepreneurial behavior.
Keller, R. (1994). Technology-Information processing fit and the performance of R&D project groups: A test of contingency theory.Academy of Management Journal, 37(1): 167-179.
Proper fit between the task complexity and information processing activities in terms of organization structure results in high firm performance.
Gittell, J. H. (2002). Coordinating mechanisms in care provider groups: Relational coordination as a mediator and input uncertainty as a moderator of performance effects. Management Science, 48(11): 1408-1427.
Gittell proposes how coordinating mechanisms work under conditions of input uncertainty.
Gittell’s theory building: According to Daft and Langel (1986), uncertainty is derived from the availability of information in relation to its requirement. Therefore, uncertainty increases with limited availability information, or extensive requirement of information, or both. Organization theory literature has studied different types of uncertainty such as environmental uncertainty, task uncertainty, and input uncertainty. Scholars suggests that different types of uncertainty would have different impacts on the effectiveness of organization structure (Comstock and Scott, 1977).
(This study focuses on input uncertainty and its influence on effectiveness of organization structure)
Generally input uncertainty is conceptualized as the uncertainty regarding inputs to the organizational process. Specifically, scholars have conceptualized input uncertainty in terms of customers as inputs to the organizational process (Argote, 1982; Gittell, 2002; Skaggs and Youndt, 2004). Argote suggested that the variability among customers and the resulting interaction problems create input uncertainty. The amount and type of customers and their interactions with the organization determines the level of information requirement and consequently the level of input uncertainty.
One of the reasons offered in organization theory for the existence of organizations is that they enable effective coordination mechanisms (Coase 1937; Kogut And Zander, 1996). Effective coordination of organizational process is important for organizational effectiveness. According to organization design theory, a variety of coordination mechanisms is possible that ranges from mechanistic with low information processing capacity to organic with high information-processing capacity (Galbraith, 1973; Tushman and Nadler, 1978). [Decentralization is expected to have high information processing capability and, therefore, be effective as the level of input uncertainty increases. Formalization, on the other hand, has low information processing capability and are expected to manage input uncertainty by reducing the need for interactions and information processing. However, Daft and Lengel (1986) suggested that when faced with high uncertainty, organizations with high information processing capability will be more effective than those with low information processing capability.
While many scholars have suggested that formalization is not effective when the organization is faced with high level of uncertainty, the empirical findings are mixed (Gittell, 2002; Schoonhoven, 1981). This is resulting in part from the fact that the contingency research hypotheses are not always clearly specified for empirical examination (Schoonhoven, 1981)
Explain Relationships (HYPOTHESES)]
(Formalization works best in low uncertainty conditions but did not explore the performance in their study, Aiken and Hage, 1968; Van de Ven et al., 1976; Keller 1978). Lawrence and Lorsch, 1967 and Khandwalla, 1974 have studied the influence of fit on performance. Argote, 1982 found that input uncertainty reduces the effectiveness of formalization.
Gittell (2002), Routines improve performance
Routine is found to be effective under condition of high input uncertainty. So, routines can be increasingly effective in response to uncertainty. According to Adler and Borys (1996), routines can be “designed to afford [participants] an understanding of where the tasks fit into the whole.” Feldman and Fafaeli (2002) propose that routine is a source of connections and shared understanding among participants. Hence by increasing the understanding of the overall organizational process, individual roles in the process, routines should increase effectiveness under high input uncertainty.
Skaggs, B. C. & Youndt, M. (2004). Strategic positioning, human capital, and performance in service organizations: a customer interaction approach. Strategic Management Journal, 25(1): 85-