Prof. Dr. Wolfgang König, Prof. Dr.-Ing. Ralf ... - E-Finance Lab

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Mindfully resisting the bandwagon M Wolf et al
turbulent environment, such as the financial services sector,
makes an industry susceptible to mimetic behaviour (Fiol
and O’Connor, 2003; Swanson and Ramiller, 2004). Thus,
even if the consequences and benefits of an IT innovation
are poorly understood, MP fosters its assimilation, if
adopting firms are perceived as successful. By contrast,
coercive pressure (CP) arises from societal expectations in
a broader sense, where firms have to conform to expectations,
policies or regulation from government, from
customers or from the competitive environment. For
example, one consequence of the financial crisis was tighter
regulation of the financial services industry. Finally,
normative pressure (NP) arises from the ongoing process
of professionalization, which is further enforced by close
collaboration with suppliers, business partners and governmental
promotion. Since the focus of our study is on the
interplay between mimicry and OM with regard to IT-based
business value generation, we conceptualized normative
and CPs as controls to account for other confounding
institutional influences.
In our case, mimicry is of special importance, particularly
since organizations in the financial sector are exposed
to an uncertain and hyper-competitive environment
(Ang and Cummings, 1997). Consequently, structural
and behavioural changes in firms are driven equally by
an inherent organizational need for legitimacy and by
considerations of competitive advantage and hidden
efficiency potentials (Meyer and Rowan, 1977; DiMaggio
and Powell, 1983). In some scenarios, information on the
number and type of first adopters might outweigh the
importance of the characteristics of the actual innovation
(Meyer and Rowan, 1977; Aldrich and Fiol, 1994). Under
the high-ambiguity conditions that prevail in highly
turbulent environments, bandwagon pressure or MP is
likely to be higher (Rosenkopf and Abrahamson, 1999).
In the long run, this is likely to lead to organizational
isomorphism and homogeneity (Meyer and Rowan, 1977;
DiMaggio and Powell, 1983).
Accordingly, we hypothesize:
H1: Mimetic pressure drives top management to support
IT innovation assimilation.
H2: A higher extent of environmental turbulence
strengthens the influence of mimetic pressure on top
management support for IT innovation assimilation.
OM as dynamic capability to accommodate conditions of high
uncertainty
The success of organizations that achieve and sustain a
superior position in highly turbulent markets can be
attributed, in particular, to their timely responsiveness
(Teece et al., 1997). In this context, responsiveness can be
characterized by the capability of continuous product
innovation, complemented by management capability to
coordinate and redeploy internal and external competences
effectively with regard to identified changes in the
environment (Teece et al., 1997). These characteristics are
subsumed as part of the concept of dynamic capabilities
(Teece et al., 1997), which captures a firm’s ability to tailor
decisions and actions to environmental conditions, and
identify mutual interdependencies (Lawrence and Lorsch,
1967).
In general, dynamic capabilities are defined as the
‘capacity to renew competences so as to achieve congruence
with the changing business environment’ and the ability to
‘appropriately adapt, integrate, and reconfigure internal
and external organizational skills, resources, and functional
competences to match the requirements of a changing
environment’ (Teece et al., 1997:515). These capabilities
are critical in highly turbulent environments (Ang and
Cummings, 1997). Here, accurate perception of the
environment facilitates a better fit between decision making
and the organizational context (Tenbrunsel et al., 1996).
Moreover, dynamic capabilities foster the ability to identify
new opportunities, to (re-)design business processes
effectively and efficiently to foster business value generation
(Teece et al., 1997), and to resist bandwagon
phenomena that are inappropriate for the organizational
context (Swanson and Ramiller, 2004). Highly turbulent
environments, as exemplified by the financial services
industry during the financial crisis, are characterized by a
high extent of uncertainty, which demands a complex
sense-making capability to safeguard organizational
performance (McGill et al., 1993). Basically, the microfoundations
of these sense-making capabilities can be
attributed to scanning and interpretation activities (Thomas
et al., 1993). Scanning is defined as ‘searching the external
environment to identify important events or issues that
might affect an organisation’ (Thomas et al., 1993:241). The
scanning process is particularly critical for top management,
which is usually exposed to more information than it can
process in its decision making (Mintzberg, 1973). For
instance, top management has to anticipate the consequences
of a technological paradigm shift, such as the
on-demand IT resource provisioning facilitated by Grid
computing. In contrast, interpretation is defined as ‘development
or application of ways of comprehending the
meaning of information – it entails the fitting of information
into some structure for understanding and action’ (Thomas
et al., 1993:241). In the context of this research, interpretation
involves the derivation of IT innovation strategies
that maximize utilization of the benefits of Grid computing
for the assimilating firm, and foster awareness of the
inherent risks.
In a first step, accurate and discriminant perception
(scanning) and mindful evaluation (interpretation) of the
environmental conditions explicitly allows for cognitive
dissonance, which is assumed to be a core prerequisite for
resisting bandwagon phenomena (Festinger, 1967; Fiol and
O’Connor, 2003). Cognitive dissonance allows decision
makers to notice contradicting information that might shed
different light on future and past decisions (Festinger,
1967). One concept that particularly explicates this
cognitive state of heightened awareness and nuanced
decision making is that of individual mindfulness (Langer,
1989; Langer and Moldoveanu, 2000), which was eventually
transferred by Weick et al. (1999) to the organizational
level of high-reliability organizations (HROs). Analogous to
financial services providers, these HROs, such as nuclear
power plants and naval aircraft carriers, have to deal with
unexpected events in an environment characterized by
extreme turbulence, where error is omnipresent, and is