DESCRIPTION OF THE MODEL

The conceptual model was created to provide the practicing manager with the major variables that a manager would need to consider in developing a societal posture that contributes to the financial success of the firm. Each country presents cultural and political dynamics that are unique; hence, the need for a national posture in each country. In addition, the model was created to facilitate the broader perspective of a potential empirical investigation, to recognize all dimensions critical to the exploratory domain from a multidisciplinary approach, and to facilitate the selection of a research domain(s) while controlling for exogenous variables. Furthermore, it forces a manager to take a multidisciplinary approach by looking at the problem through different scientific optics, such as the cognitive-logical, psycho-sociological, and political perspectives. The sociopolitical environment defines both the market and non-market dynamics. Rule makers will incorporate environmental signals into their decision-making process. Such decisions are subject not only to the general external sociopolitical environment but also to the prevailing national culture and stakeholders. Rule makers establish the canons of the game; hence, the managers receive their information from stakeholders, rule makers, and the firm's internal structure before they render a choice of strategic posture. However, the stakeholders are influenced by the societal strategy performance; therefore, the managerial strategic-posture choice is prompting societal performance as well. In order to put the conceptual model in context, we must explore the basic elements of societal strategy as they relate to societal elements.

ENVIRONMENT AND SOCIETAL STRATEGY

Scholars have explored the gravity of the environment as a determinant of strategy and some have specifically affirmed the societal context of the modern firm (see Table 12.1). Clearly the nonmarket environment (social and political) affects the business activities,18 pressing the business institution to recognize the strategic implications of the nonmarket activities. Although emerging societal trends induce overall corporate revisions, it is the changes in the social and political environment that trigger corresponding social and political strategies by the business institution.

Although it is postulated that the environment influences strategy, its degree, scope, and extent vary in organizational theory (see Table 12.2). Distinctly, the departure from Weber's theories19 of treating the firm as a "closed system" triggered research that explored the degree to which a firm depended to the environment.

The environment-organization relationship postulated by the various organizational theories led to the suggestion that firms ought to integrate exogenous political pressures into the comprehensive strategy of the firm. Thus, it is evident that the political pressure exerted on the business firm required the field of strategic management to integrate social policy20 and societal strategy21 into the overall corporate strategy and/or strategic posture of the firm. Considering the various environmental conditions (i.e., heavily regulated old industries versus new and novel industries with minimal regulations), it is argued that firms need to investigate the development of an analytical framework to facilitate societal (i.e., political and social) responses by the business firm.22 There

Table 12.1. Environment, Strategy, and Societal Context of the Business Firm

Environment, Strategy, and Societal Context of the Business Firm

Table 12.2. Perspectives on the Environment-Organization Relationship

Theory

Basic Perspectives-Propositions-Modifications

Selected Authors Who Have Written and/or Researched on This Topic

Open systems

Rate of change of organizational systems must correspond to the environmental change

Ashby, 1956; Emery and Trist, 1960 and 1965; Trist, 1981

Resource dependence

Strategic choices to adapt organizations to environmental pressures and uncertainties; thus, to reduce resource dependence

Pfeffer and Salancik, 1978; Ulrich and Barney, 1984

Institutional

Organizations obtain legitimacy from their institutional (political) environment

Jepperson, 1991; Meyer and Rowan, 1977; Scott, 1987; Dimaggio and Powell, 1991

Transaction cost

Organizations seek to economize transaction costs in exchanges with the environment

Williamson, 1981

Stakeholder

Stakeholders seeking influence and/or power constitute the (political) environment.

Freeman, 1984; Wood, 1991

Contingency

Optimal performance is the result of appropriate alignment between the environmental (political) turbulence and managerial behavior and capability

Ansoff, 1979; Ansoff and McDonnell, 1990; Child, 1972; Lawrence and Lorsch, 1967; Mintzeberg, 1973; Ginsberg and Venkatraman, 1985; Fiegenbaum, et. al., 1996

Organizational ecology

Environmental (political) pressure allows only fit organizational forms to survive

Aldrich and Pfeffer 1976; Hannan and Freeman, 1989

are different environmental conditions existing for each business firm, requiring distinct competencies to facilitate a competitive optimization of regulations and public policy.23 Hence, the development of a measurement of external intensity of the social and political environment offers management a mechanism to assess information to facilitate appropriate responses. The suggestion to adjust organizational systems changes to match the rate of environmental change may have led scholars to coin

Table 12.3. Environmental-Turbulence Descriptions

Environmental-Turbulence Descriptions

the term "environmental turbulence"24 as a measurement of the environmental change.

 
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