Institutional Forces and Organizational Culture in China: Effects on Change Schemas,

Firm Commitment and Job Satisfaction

Author(s): Chung-Ming Lau, David K. Tse and Nan Zhou
Source: Journal of International Business Studies , 3rd Qtr., 2002, Vol. 33, No. 3 (3rd
Qtr., 2002), pp. 533-550
Published by: Published by: Palgrave Macmillan Journals on behalf of Academy of
International Business.

Stable URL: https://www.jstor.org/stable/3069529

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 Institutional Forces and Organizational
Culture in China: Effects on Change
Schemas, Firm Commitment and
Job Satisfaction
Chung-Ming Lau*
CHINESE UNIVERSITY OF HONG KONG

David K. Tse**
UNIVERSITY OF HONG KONG

Nan Zhou***
CITY UNIVERSITY OF HONG KONG

This paper examines the effects of and foreign firms operating in similar
institutional forces on change sche-
contexts are examined. Through a
mas of senior managers, mid-level survey of 3,960 managers and work-
managers and front-line workers ofers we test hypotheses that relate var-
different types of firms in China. We
ious intitutional forces on how indi-
postulate that several socio-eco-viduals perceive, evaluate and infer
nomic forces including regional eco-future changes that challenge them.
nomic prosperity, firm type (state- We also examine the effects of indi-
owned and foreign-invested), with- vidual change schema on firm com-
in-firm ranks, and organizationalmitment and job satisfaction, two in-
cultures are at work. The cognitive
dicators that may mediate future
differences among people in local
changes in these firms.

INTRODUCTION the mimetic and conforming processes of

Institutional theory has been a major organizations by the forces of their rele-
theoretical pillar as researchers examine
vant institutions (Pfeffer, 1997; Scott,

*Chung-Ming Lau is Chairman and Professor in the Department of Management at the

Chinese University of Hong Kong. His current research interests include strategic change,
organizational culture, and management of Chinese organizations.
**David K. Tse is Professor of International Marketing and Director of Chinese Management
Centre at the University of Hong Kong. He also holds a concurrent Chair Professor of
Marketing at the Guanghua School of Management at Peking University.
***Nan Zhou is Associate Professor and Head, Department of Marketing, City University of
Hong Kong.
The authors would like to thank the research assistance of Jenny Tien as well as the helpful
comments of three anonymous reviewers. Tse and Zhou acknowledge the financial support
provided by the Hong Kong Research Council (CERG CityU 1176/97H).

JOURNAL OF INTERNATIONAL BUSINESS STUDIES, 33, 3 (THIRD QUARTER 2002): 533-550 533

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INSTITUTIONAL FORCES AND ORGANIZATIONAL CULTURE

1995; Tolbert and Zucker, 1996). These schemas among managers and employ-
institutional forces are present at the ees of different ownership is useful for
macro socio-economic level, the indus- managing future changes.
try level, and the firm level. These forces In this paper, we develop a change
are known to be more complex and schema on organizational reform from
stronger in transitional than those in insights in the cognitive schema litera-
free-market economies (Hoskisson, ture (Fiske and Taylor, 1991; Markus and
Eden, Lau, and Wright, 2000; Peng Zajonc, and 1985; Walsh, 1995). We postu-
Heath, 1996; Shenkar and von Glinow, late that this change schema intervenes
1994). Accordingly, institutions and between institutional forces and em-
their effects have been a common focus ployee behavior. In addition, we sugg
in firm-behavior research in transitional that organizational culture also plays
economies across various disciplines in-important role in the process. Our stu
cluding economics (North, 1990), sociol- demonstrates how different institutional
ogy (Walder, 1995), political science forces (including societal and organiza-
(Cheng and Wang, 1993), and interna-tional) affect an employee's change sche-
tional business (Child and Tse, 2001). mas which exert subsequent impacts on
These studies have examined institu- his or her firm commitment and job sat-
tional effects due to local governments isfaction. The paper discusses how these
(Walder, 1995), social network (Child, findings provide implications on inter-
1994; Xin and Pearce 1996), and regional national business operations in China.
economic policy (Tse, Pan and Au,
INSTITUTIONAL FORCES AND
1997). Subjected to these strong and
ORGANIZATIONAL CHANGES
complex institutional effects, firms in
China are known to continuously reform Institutional theory examines the na-
their organizations (Child and Tse, ture and the influences of various eco-
2001). nomic, social and political forces exerted
This paper focuses on the cognitive by a firm's relevant institutions withi
processes of organizational changes by which a firm operates (Scott, 1995). Ac
managers and workers within various cordingly, these institutions interven
types of firms in China. We examine the and shape how firms and their members
process of institutionalization within the behave. Past studies have examined in-

firm. The study bridges a gap in the or- stitutional effects on firm behavior at

ganizational change literature by linking various levels.

At the industry level, Palmer, Jen-

institutional effects to the change pro-
cess within firms. While researchers
nings, and Zhou (1993) attributed insti-
have studied these effects on organiza-
tutional forces as a main cause for large
U.S.and
tion change at the firm level (Aldrich industrial firms to organize their op-
erations in a multi-divisional form. Al-
Fiol, 1994; Oliver, 1991, 1997), we inves-
tigate the intervening variables drich
at the and Fiol's (1994) traced the emer-
firm and individual levels, an approach
gence of industries to the cognitive legit-
echoed in a recent discussion on the ex-
imacy and sociopolitical legitimacy of
panding research on transitional econo- U.S. economy.
the
mies (Hoskisson et al., 2000). In addi- At the firm level, researchers show
tion, with China's accession to the WTO,that firms can capitalize on their relevant
more foreign firms will be operating in institutional forces to creatively develop
China. An examination of cognitive their competitive advantages. Hennart

534 JOURNAL OF INTERNATIONAL BUSINESS STUDIES

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 CHUNG-MING LAU, DAVID K. TSE, NAN ZHOU

(1994) and Liebeskind (1996) argue that firm-level resource-based analysis to a

some firms can capture economic rents
and protect valuable knowledge by orga-
nizing their internal and external trans-
actions accordingly. Drawing insights
from resource-based theories, Oliver
cognitive approach that involves both
firms and individual workers.
Subsequent studies adopted similar
approach to examine how managers as-
sess their business environments and

(1997) suggests that firms can developstrategic decision-making process (R

institutional capital to enhance the use
jagopalan and Spreitzer, 1997; Reger
of their resources within their institu- Palmer, 1996); strategic orientations an
tional environment. the relationship with organizational
sign and performance (Hitt, Tyler,
There are two implications from these
Hardee, and Park, 1995; Ramaswamy,
normative analyses. First, institutional
effects are not uniform to all firms. Thomas, and Litschert, 1994); and the
Through creative organizational designs, characteristics of the top management
some firms can reduce unfavorable insti- team, their orientations, and the cogni-
tive basis of these orientations (Ham-
tutional effects on their operation better
brick, Geletkanycz, and Fredrickson,
than others. Second, firms may benefit
from their institutional environment1993; Hitt, Dacin, Tyler, and Park, 1997;
by initiating necessary organizational1998).
Lau,
Researchers also use the cognitive ap-
changes to their advantage. Here, a com-
mon theme emerges. To improve their proach to assess how institutions con-
strain
performance and to better align their re- strategy formulation and manage-
ment decisions. Carlori, Johnson, and
sources, firms need to assess their insti-
Sarnin (1992) investigated the manage-
tutional environments and adapt accord-
rial
ingly. Moreover, institutional forces areframes of references in different in-

not necessarily external to a firm,stitutional

they environments across a num-

may include their own organizational

ber of countries. They found out tha
managers of different cultures used
culture. In order words, organizational
change is inevitable. Up till now, number
the of cognitive mappings as an-
chors for their managerial decisions. I
process of organizational change within
a firm under institutional influences is addition, the cross-cultural differences
not fully understood. are directly attributable to the institu-
Ginsberg and Venkatraman (1995) tional environments in which the firms

examined how firms respond to in- operate. These cognitive mappings shape
stitutional initiatives for technological the way managers formulate their firm
change. They developed a cognitive ap- strategies. Elliot, Hayward, and Canon
proach that looked at the readiness of (1998) examined the issue of institu-
change for the firms by understanding tional framing on entrepreneurial strate-
the perception of change of their manag- gic decisions. In an experiment, they
ers. Using this approach they were able found that institutional framing is a con-
to delineate various firm strategies to ditioner for major economic decisions,
technological change. In addition, their and managerial decisions were con-
approach enables them to assess how strained by the perceptions of environ-
institutional initiatives impacted firm mental frames. McKinley, Zhao, and
commitment to enhance its adaptive Rust (2000) noted that downsizing has
competencies. Their study extends the become institutionalized through a col-
organization change literature from a lective 'downsizing is effective' schema.

VOL. 33, No. 3, THIRD QUARTER, 2002 535

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INSTITUTIONAL FORCES AND ORGANIZATIONAL CULTURE

Three key implications can be derived firm level, an area instrumental to the
from these studies. First, institutional
future development of the institutional
forces influenced both individual- and
theory (Tolbert and Zucker, 1996). As we
assess the institutional effects on mana-
firm-level perceptions of organizational
changes. Second, these influences gerial
oc- change schemas and their firm
curred at the societal, firm and individ-
commitment and job satisfaction, we can
ual levels as the key actors (managers
develop useful insights for managing in-
and workers) seek for legitimacy ternational
for business operations in tran-
sitional economies.
change. Third, how institutional forces
affect individual workers can be under-Change orientation refers to the atti-
tude of people in an organization to-
stood through their cognitive schemas.
wards changes. It is developed from a
CHANGE SCHEMAS IN TRANSITIONAL
cognitive map (i.e., change schema) that
ECONOMIES
involves the attributes of change events
Institutional effects on firms are highly and the relationships among these
complex in a transitional economy like events (Fiske and Taylor, 1991). The cog-
China as its regulated environments are nitive map is known to be context-spe-
continuously being reformed. Shenkar cific schema (Abelson and Black, 1986;
and von Glinow (1994) noted that Chi- Walsh, 1995) that has three dimensions
na's large state-own firms are active play- including change attributes (salience),
ers as their operating environments un- affect towards change (valence) and per-
dergo overlapping phases of marketiza- ceived consequence of change (infer-
tion and privatization. Many of them ence) (Lau and Woodman, 1995; Markus
form large multi-level inter-dependent and Zajonc, 1985). In this study, we op-
networks to cushion the unfavorable ef- erationalize this latest conceptualization
of change schema to examine how soci-
fects of the reform and to fend off global
competition as China joins the WTO etal and organizational institutional
(Child and Tse, 2001). In their in depth forces affect workers' change schemas.
firm studies, Child and Lu (1996) and Lu We also assess how workers' change
and Heard (1995) found that firm invest- schemas in turn influence individual

ment decisions are highly institutional- firm commitment and job satisfacti
dependent. Impacts due to government The institutional forces we examine in-

policies, enterprise autonomy, regula- clude the ownership of the firms, the
tory agencies, and shareholders are geographical region they are in, the level
found to be strong. The same is true for of the individuals in the firm, and the
individual workers that many Chinese organization's culture.
managers are induced by institutional
forces to engage in opportunistic behav- Institutional and Organizational
ior in order to survive (Boisot and Liang, Influences on Change Schemas
1992). An individual's past life experiences
The above findings suggest that transi- and beliefs are known to be key bases in
tional economies offer rich contexts for forming one's schema (Cantor, 1990;
Poole, Gray and Gioia, 1990). When
the study of institutional effects on orga-
nizational change. By examining indi-
faced with a particular context, salient
vidual workers' perceptions towardsforces of the context will interact with
these base variables to form context-spe-
change, we can assess how firms inter-
cific schemas that guide an individual's
nalize change at both the worker and

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 CHUNG-MING LAU, DAVID K. TSE, NAN ZHOU

behavior. Lau and Woodman (1995) gions experience fewer changes and,
pointed to the significance of the contex-over time, their perception for the need
tual forces in the schema formation pro- to reform is less imminent. Accordingly,
cess. In this study, the contextual forcesfirms in these regions find it more diffi-
are the relevant institutional influences cult to justify changes within their orga-
at the societal and the firm levels that nization.

influence a worker's change schema. We hypothesize that people in firms of

more economically developed regions
Specifically, it is suggested that regional
development, ownership, managerial will have a more positive predisposition
toward change, their schemas will con-
levels and organizational culture are the
relevant forces. tain higher perceived salience, positive
When China's central government in-valence, and less skeptical about change
troduces country-wide economic re- consequences.
forms, it also allows regions to differ.
Hypothesis 1: The change schemas
These economic reforms are generally
people in more developed regions a
characterized by overlapping phases of
more likely characterized by higher s
opening regulated markets and intro-
lience about change, higher valenc
ducing accompanying policies (called
and less skeptical about change con
marketization). Often regions that are
quences than those of people in le
economically more developed are des-
developed regions.
ignated as reform zones. They face
sweeping and immediate changes while Another institutional force in China's
changes in non-reform regions will beeconomic reform is its continuous ex-
restricted or delayed. This regional di-pansion of its private sector (called pr
versity helps to maintain China's socialvatization) (Li and Tse, 1998). Overtime,
stability during its two decades of con-this continuous expansion gave birth
tinuous reform. In these reform zones, firms of different ownership pattern
the regional governments have known to Starting in 1979, Sino-foreign joint ven
actively promote reform as a necessary tures were introduced to accommodate
social construction process (Calori et al., the entry of foreign financial capital an
1992; McKinley et al., 2000). They intro- technology. A few years later, small pri
duced policies that facilitate reforms and vate firms were allowed to operate. A
implemented them accordingly. Over the same time, former communes were
time, people in these regions have inter- allowed to emerge and operate indepen-
nalized the need to reform and regard dent of the state control. This led to the
change as part of their daily lives. At the explosive growth of millions of town and
firm level, managers often make use of village enterprises (collectives). By 1989,
the societal acceptance for change as le- the total output of the private sector sur-
gitimacy for their own reforms (DiMag- passed that of the state-own firms to be-
gio and Powell, 1983). come China's major economic contribu-
In contrast, for those in more back- tor. In 1993, joint stock firms whose
ward, economically less developed re- ownership is shared by workers, individ-
gions, changes are not as highly antici- ual investors, firms and governments be-
pated. Some regional governments havegan to take form. Their status was fully
made use of the national diversity in re- endorsed in 1999 (Tse and Lau, 2000).
form to minimize the pressures for With China's continuous development
change. As a result, people in these re- of its two stock exchanges and privatiza-

VOL. 33, No. 3, THIRD QUARTER, 2002 537

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INSTITUTIONAL FORCES AND ORGANIZATIONAL CULTURE

tion plan for its state firms, it is likely sequences than those of people in re-
that private firms will dominate in its formed enterprises.
future economic scene (Child and Tse,
2001). Further, with the entry to WTO, Institutional forces also influence em-

the impact of foreign firms would be ployees working inside a firm. Senior
higher. managers who are responsible for the
Motivated primarily by profit rather firm's future face pressure from compe-
than by meeting state quotas, private tition and changes initiated by the gov-
firms in China are more receptive to op- ernments. Internally they need to func-
eration efficiency and organizational tion as leaders and as change champions.
changes (Lau, Ngo, and Chow, 1998). In general, they face more institutional
They are known to offer more perfor- forces for change than an average
mance-base rewards. For those working worker. Nonetheless, these managers
in these firms, they are more receptive to have more discretion on the extent of
future changes as they realize that the changes and their timing. They possess
more successful the firm becomes, the the locus of control in most changing
more reward they may receive. Simi- environments (Lu and Heard, 1995).
larly, those in joint-ventures would Some managers are known to use social
share similar cognitions. networks (guanxi) and political re-
On the order hand, state-own-enter- sources (Xin and Pearce, 1996) to cush-
prises (SOEs) have inherent inertia ion changes that affect them unfavor-
against changes. While they are pressed ably. In sum, senior managers will likely
by competition from private firms to have a schema that is less skeptical about
change, many of them are constrained by change, and is able to accept uncertainty
regulative requirements that hold them when compared to other employees.
back. Internally, SOE employees are con-
Lower rank employees in China's
cerned about losing their job and they changing environment faced a different
resist changes. As a result many SOE set of institutional influences. Without
leaders try to secure their firm positions
decision authority and connections,
through lobbying governments. Some of most front-line workers are vulnerable to
them seek legitimacy to exist among
firms of similar nature.
reorganizations within their firms. In a
semi-controlled and an over-supplied la-
We hypothesize that firms that are
bor market, most of them are captives to
constantly under institutional forces to
their current posts. Recent mass layoffs
change will respond positively to change
in SOEs further reinforced their fear. As
in order to legitimize their existence.
a result, front-line workers are often vic-
Thus, we anticipate that people in state-
tims of change and tend to have a
owned enterprises have orientations that
schema that is not positive about change.
are less favorable to change, and those in
joint ventures, collectives, and joint- They are likely to be more reluctant to
stock firms are more receptive to change.accept changes than senior managers.
Compared with senior managers, the
Hypothesis 2: The change schemas ofmiddle-level managers have less control,
people in state-owned enterprises areyet compared with front-line workers,
more likely characterized by lower sa- they would have higher job mobility. As
lience about change, lower valence, a result, we expect that their orientation
and more skeptical about change con-towards change would fall in between

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 CHUNG-MING LAU, DAVID K. TSE, NAN ZHOU

that of senior managers and front-line engage more in improvement initia-

workers. We therefore hypothesize: tives. For example, Riolli-Saltzman
and Luthans (2001) found that a strong
Hypothesis 3: The change schemas of
adaptable culture is important for tech-
senior management, relative to mid-
nology firms to remain competitive.
dle-level management and workers, Studies have also indicated that shared
are more likely characterized by
cognition in top management teams is
higher salience about change, higher
important in new venture performance
valence, and less skeptical about
(Ensley, Pearson, and Amason, 2002)
change consequences.
and firms with a group orientation
Organizational culture is generally un- would have higher tendency to change
derstood as the social glue that holdsand engage in innovative activities (Lau
organizational members together and ex-and Ngo, 2001).
presses the values, social ideals, and be- Hence, a flexibility culture would be
liefs that members share. A firm's culture associated with a relatively positive per-
therefore, through its values and operat- ception about change. We therefore hy-
ing beliefs, is known to exert command- pothesize:
ing influences on how its employee per-
ceive events (Denison and Mishra, 1995; Hypothesis 4: The change schemas of
Lau and Woodman, 1995) and how they people in firms with a flexible culture
behave (Martin, 1992). Managers are are more likely characterized by
known to change a firm's direction by higher salience about change, higher
changing its cultures effectively. When a valence, and less skeptical about
firm encounters a new environment, the change consequences.
way managers model its new problem
space anchors how the firm defines its Change Schema and Personal
Outcomes
role and its subsequent strategy (Tripsas
and Gavetti, 2000). How people with different chang
Thus, an organization's culture is re- schemas behave in their job has not bee
lated to how members share a common studied in past literature. We postula
that change schemas will have signif
frame of reference for changes in an or-
cant impacts on an individual's perfor
ganization. When organizations have dif-
mance including firm commitment an
ferent cultures, people will have differ-
ent perceptions and interpretationsjob of satisfaction. Such impacts are of pro
organizational changes, and hence dif- found significance to the success or fail
ferent schemas about change (Lau and ure of changes within a firm. For those
Woodman, 1995). firms that possess committed and satis-
There are different types of cultures fied employees, the changes would
among firms. Quinn (1988) suggests that likely be smooth. In contrast, it would be
firms with group and developmental cul- difficult to accomplish changes in firms
tures have a flexibility orientation. In that have uncommitted and dissatisfied

these firms, when the managers share a employees.

common view and the necessity of We will examine the relationship be-
change, they would be more prone to tween different dimensions of the

new actions and changes. When employ- change schema, firm commitmen
ees have a collective mindset of flexibil-
job satisfaction. In a firm that is un
going reform, those employees wh
ity and future-orientation, a firm would

VOL. 33, No. 3, THIRD QUARTER, 2002 539

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INSTITUTIONAL FORCES AND ORGANIZATIONAL CULTURE

more skeptical about changes will likely joint stock companies in each city. W
have a lower job satisfaction and lower controlled for firm size and industry ty
firm commitment. In contrast, for those by selecting those manufacturing firm
who see the value of change, they will that employed over 100 employee
likely have a higher firm commit- Within each firm in our sample, we ra
ment and job satisfaction. In addition, domly selected 22 employees as pote
employees with a positive predisposi- tial respondents. They included two s
tion and belief about change will en- nior executives: the directors (or equiv
hance a firm's capability to change (Trip- lent) of the personnel and marketin
sas and Gavetti, 2000). This commitment departments, ten randomly selecte
to change is reinforced by the culture of middle-level managers; and ten ran
the firms (Detert, Schroeder, and Mau- domly selected front-line employees.
riel, 2000), employees of these firms will new name was added when a potenti
be more satisfied and committed. We respondent declined to participate in th
therefore hypothesize: research. There are altogether 3,960 r
spondents from 180 firms.
Hypothesis 5: The extent that the The survey was conducted through
change schema is more positive about face-to-face interviews in late 1997.
change (higher salience, higher va- Since non-mainland Chinese researchers
lence, and less skeptical) is positively were not permitted to make direct con-
related to job satisfaction and firm tact with mainland residents, a major
commitment.
research company was commissioned to
conduct the interviews. All respondents
METHOD
were informed of the confidentiality of
the their responses in advance. Each re-
Sample and Data Collection spondent was given a cash present
equivalent to an average worker's half-
Our study is composed of a large-scale
survey among different cities in China.
day salary. In addition to controls by the
The survey sample consisted of senior
research firm, an experienced research
and mid-level managers and front-line
assistant was hired independently who
workers of firms in nine cities. The cities traveled to seven of the nine cities to

were selected to represent regions ofmonitor the fieldwork. Over 60% of pa

high economic development (Beijing, ticipants were telephoned to confirm
that the interviews had been conducted.
Shanghai, Guangzhou in key and coastal
region), medium development (Nanjing,No cheating by field workers was found.
Wuhan, Chengdu in central region), and
Variables
low level of development (Xian, Chang-
chun, Guiyang in the north west region), Change schema. The change schema
based on their average worker income inwas measured by an eleven-item scale
1995. specifically adapted for this study from
Twenty firms were randomly selected Lau and Woodman's (1995) cultural
from the manufacturing sector inchange
each instrument. The items include
the
city according to the 1995 national change expectations, consideration
in-
dustrial statistical data bank supplied
of by
risks, security, and effects on individ-
uals. This is in line with the salience,
the State Statistical Bureau. We sampled
an equal number of state-owned enter- valence, and inference aspects of cul-
prises, joint ventures, collectives,tural
and change schemas (Lau and Wood-

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 CHUNG-MING LAU, DAVID K. TSE, NAN ZHOU

man, 1995). Respondents were asked to We employed hierarchical linear model-

indicate their perception of the impacts ing (HLM) to assess the relative effects of
of current economic reform and enter- institutional forces and organizational
prise change on themselves. A 6-point culture in this multi-level data (Bryk and
Likert scale was used, with 1 indicating
Raudenbush, 1992). The managerial rank
'strongly agree.' and organization culture are the first
Region, firm ownership, and rank.level predictors (for testing H3 and H4),
According to the level of different eco-and higher-level region and firm type are
nomic development of the cities, the modeled as second-level predictors (for
firms from highly developed regionstesting H1 and H2). HLM was also used
were dummy coded as Regioni = 1. The to test for the effects of the three change
medium developed cities were dummy schema factors on the job satisfaction
coded as Region2 = 1 and the less devel-
and firm commitment, after controlling
oped cities were represented by a zero in
for the institutional differences.
both regional dummy variables. For firm
types, the collectives were dummy RESULTS
coded as firml = 1 and joint stock firms
were coded as firm2=1, while the JVs Table 1 presents the three factor solu-
were coded as firm3 = 1. The SOEs were tions with varimax rotation of the change
schemas of all respondents. The factors
used as the reference group and coded by
represent the three dimensions of a
0 in all firm types. The workers were
dummy coded as ranki = 1 and middle-schema: the cognitive and salience of
change (change salience), the evaluation
level managers as rank2 = 1, while the
senior managers were the reference of a change event (change valence), and
group. the significance and control attached to a
Organizational culture. This was cap- change (change inference). The coeffi-
tured by 10 organization culture items cient alphas of these three factors were
extended from Lau and Ngo's (1996) in- 0.69, 0.71 and 0.57.
strument developed and validated from The change salience factor involves a
the competing values framework (Quinn, cognitive element of affirming the need
1988). The items measured the group to and significance of change, seeking
and developmental culture, both of more information, and the willingness to
which have a flexibility orientation. The help out changes. The change valence
split-half coefficient alphas of these factor represents an understanding of the
items in the current study were 0.84 and benefits of change and reform and hence
the confidence and commitment to
0.91 respectively.
Job satisfaction and firm commitment. change. The last factor, change in
Job satisfaction and firm commitment ences, describes the evaluation and con-
were measured by a 10 item scale and a cerns one has over the change event. The
5 item scale respectively. These were es- evaluation items are worded negatively
tablished scales and had alphas of 0.88 and thus represent the skeptical nature
and 0.92 respectively. of and perceived negative side of change.
Thus, a lower score of the inference fac-
Analyses tor implies that the respondents have
The schema items were first factor an-
more worries about the impact of change
on themselves. The other two factors are
alyzed with varimax rotation to confirm
positively worded and hence a lower
the dimensions of the change schema.

VOL. 33, NO. 3, THIRD QUARTER, 2002 541

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INSTITUTIONAL FORCES AND ORGANIZATIONAL CULTURE

TABLE 1
FACTOR ANALYSIS ON CHANGE SCHEMA ITEMS WITH VARIMAX ROTATION

Change Change Change

Salience Valence Inferences

1. I would like to get more information about change .810

2. Change is inevitable .765
3. I know what reform is going to bring about .619
4. I expect to contribute to reform .556
5. Reform has benefits to all employees .811
6. Change has brought about vitality to our firm .688
7. I have full confidence on reform .418 .685
8. I am worry that reform will benefit some
individuals only .768
9. I worry that change will be detrimental to me .672
10. I worry about the risk associated with change .619
11. Reform will give benefits to the leaders .539
Coefficient alphas 0.689 0.713 0.568

*factor loadings of less than .4 are not show

score means a more means workers are inclined

positive to have more
expectation
toward change (since worries1(lower score on this
= fully dimension)
agree).
The correlation coefficients of all vari- than senior managers. For middle man-
ables are shown in Table 2. The three agers, the only significant coefficient is
change schema items are first analyzed on change inference. It is negative, sim-
using rank of employees, development ilar to workers, which implies that they
and group culture as first level predic- also have more worries about change
tors. Then, the region dummies and than senior managers. The rank dum-
ownership dummies are added intomies the have no significant association with
equations to test for the second levelchange in- valence (except at 0.1 level for
tercept-as-outcome and slope-as-out-
middle managers). Hence, H3 is partially
come models. Table 3 shows the results
confirmed.
of institutional forces and change
On organizational culture, the flexibil-
schema dimensions using HLM analysis.
ity orientation is examined in terms of
The significant rank dummies indicate
development and group cultures. The
that there are associations of respective
rank with each schema dimension as coefficients of development culture are
positive on change valence and negative
compared to senior mangers (the refer-
ence group). Front-line workerson inference. This means that a develop-
were
ment culture is associated with a higher
found to have a positive coefficient on
change salience and a negative one valence
withand less worry. Similarly, group
inference. This implies that workers culture
ex- has positive associations with
press relatively less salience to changesalience and valence. This im-
change
than senior managers, since a highplies scorethat both cultures are associated
of 'change salience' means a lower with a positive change schema. Firms
sa-
lience. A negative on change inference with a flexibility orientation have a

542 JOURNAL OF INTERNATIONAL BUSINESS STUDIES

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0

0
0

H
0

w
0
tT-l

TABLE 2
iOi
CORRETATION PATTERNS OF THE KEY VARIAB

dd 1 2 3 4 5 6 7 8 9

1 Rank (Worker)
2 Rank (Middle) -.29**
tTi

3 Region (Highly developed) .00 .00

4 Region (Medium
developed) .00 .00 -.5**
5 Firm Type (Collectives) .00 .00 .00 .00
6 Firm Type (oint ventures) .00 .00 .00 .00 -.33**
7 Firm Type (oint-stock) .00 .00 .00 .00 -.33** -.33**
8 Developmental Culture -.05* -.04* .11** -.12** -.04* .02 -.07**
9 Group Culture -.02 -.06** .09** -.05** -.06** .03 -.03 .
10 Change Salience .12** -.06** .00 -.06** .03 .06** -.02 .
11 Change Valence -.03 -.04 .05** -.07** -.02 -.01 -.05** .4
12 Change Inference -.12** .10** .01 .26** .00 -.03 .03 -.0
13 Firm Commitment -.05** -.06** .08** -.10** -.02 .00 -.04*
14 Job Satisfaction .09** -.13** .09** .00 .01 .00 -.06** .46**

** = significant at .01; * = significant at .05

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INSTITUTIONAL FORCES AND ORGANIZATIONAL CULTURE

TABLE 3
HLM ANALYSIS RESULTS OF INSTITUTIONAL FACTORS
AND CHANGE SCHEMA FACTORS

Change Salience Change Valence Change Inference

Level 1

Intercept (Io) -0.549** -1.195** 0.455**

Ranki workers 0.272** 0.020 -0.415**
Rank2 middle managers 0.054 0.095t -0.218**
Developmental culture 0.019 0.355** -0.156**
Group culture 0.156** 0.121* 0.092t
Level 2a

Intercept (,3o) Regionl 0.099t Regionl 0.185**

Region2 0.169** Region2 0.152*
Firml 0.124t Firml -0.158*
Firm3 0.193** Firm2 -0.210*
Ranki workers Firm2 0.316t
Rank2 middle managers Firml -0.322**
Firm2 -0.273t
Firm3 -0.278t
Developmental culture Regionl -0.212* Region2 0.185t
Firm2 0.267*
Group culture Firm2 -0.245t Region2 -0.372**

afor simplicity of presentation, only significant coeffic

**p < .01; *p < .05; tp < .1
regioni = highly developed region; region2 = medium developed region
firml = collectives; firm2 = joint stock company; firm3 = joint venture

higher salience, higher valence, and less have higher salience than less developed
skeptical about change. H4 is confirmed. region. Similarly, collectives and joint
The next step is to analyze the effects ventures have a higher salience than
of level-2 predictors on the intercepts as SOEs (the reference group).
well as rank and culture. All three inter- In addition, the effects of region and
cepts (P3) of the change schema dimen- ownership on rank and culture (slopes)
sions are significant, which indicate that are also examined. We found that devel-
there are some factors which could ex- opment culture is negatively associated
plain the differences between the firm with highly developed region and but
groups. The possible associations with positively associated with joint stock
region and ownership are then explored. company. However, development cul-
For change salience, the intercept is pos- ture has no effect on salience in the
itively associated with medium devel- level-I model. The other associations are
oped region and joint ventures at 0.05 marginal only. Hence, the net effects of
level, and highly developed region and region and ownership via the rank and
collectives at 0.1 level. Since the inter- culture are not clear. For change valence,
cept is negatively associated with sa- both highly and medium developed re-
lience, more developed regions therefore gions are positively associated with the

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 CHUNG-MING LAU, DAVID K. TSE, NAN ZHOU

intercept, and hence have higher va- firm commitment to reduce their chance
lence. The collectives and joint stock of being laid off.
companies, however, have negative asso- Relative to senior managers, workers
ciation with the valence intercept. This and middle managers are not as commit-
implies a lower valence is attached to ted and satisfied. Additionally, a flexible
changes in these firms. Although collec- culture does relate to higher firm com-
tives have effects on middle managers, mitment and job satisfaction. The effects
but middle managers have no effect on of region and ownership on these two
valence. variables are analyzed in the level-2
For change inference, no significant models. Relative to lower developed re-
coefficients are found on the inference gions, highly developed region is posi-
intercept. Only medium-developed tively re- related to commitment and satis-
gion firms have negative association faction, and medium developed is re-
with group culture, but group culture lated to satisfaction only. Moreover,
has no association with change inferencecollectives and joint stock companies
in level-1 model. have a relatively higher commitment and
Hence, we can summarize that H1 and satisfaction than SOEs since they relate
H2 are partially confirmed. Highly devel- negatively with the intercept. Looking at
oped regions and non-SOEs have a rela- the results of the slope-as-outcome anal-
tively higher salience about change, and ysis, ownership (specifically the collec-
highly developed regions have a rela- tives) has relatively more associations
tively higher valence attached to change. with the slopes than other forces, but the
The effect of regions and ownership on effects are mixed.
inference is not confirmed. The effects of
CONCLUSION
a flexibility culture on change schemas
are confirmed (H4), while the effects of The current study identified three key
rank are not fully supported (H3). dimensions of a cognitive schema re-
The associations of change dimen- garding economic and organizational
sions and individual outcomes are also changes in a transitional economy. The
explored using HLM. In the level-1 mod-
three dimensions, change salience, change
els, change schema dimensions, rank, valence, and change inference are in line
and culture are all positively and signif-
with those in organization change litera-
icantly related to firm commitment ture.
and We confirmed that different envi-
job satisfaction, except inference which
ronmental factors affect employees dif-
is negatively related to job satisfaction (a
ferently through their change schemas.
negative relationship with inference im-Among different firm types, we found
plies less worry about change). Hence,that employees in joint ventures and re-
H5 is confirmed (see Table 4). Higher formed
job enterprises are more salient to
satisfaction is associated with higherchange
sa- than those in state-owned enter-
lience and valence, and less skepticalprises. By considering the regional con-
about change. In addition, higher texts,
firm employees in more developed re-
commitment is associated with highergions have higher salience to change and
valence about change. Due to normative
salience, higher valence but lower infer-
ence (i.e., more worries are found toforces,
re- senior managers are more salient
late to higher firm commitment.) Itand less skeptical about change. Organi-
could
zation
be that employees who worry about fu-cultures with a flexible orienta-
ture changes consciously show higher
tion are also related to high salience,

VOL. 33, No. 3, THIRD QUARTER, 2002 545

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INSTITUTIONAL FORCES AND ORGANIZATIONAL CULTURE

TABLE 4
HLM ANALYSIS RESULT OF CHANGE SCEMA DIMENSIONS,
COMMITMENT AND SATISFACTION

Commitment Satisfaction

Level 1
Intercept (o,) 15.848** 19.357**
Ranki workers 1.004* 1.369**
Rank2 middle mgrs 1.371** 1.195**
Change salience 1.149** 0.451**
Change valence 1.604 ** 0.965* *
Change inference 0.428** -0.610**
Developmental culture 3.401 ** 0.958* *
Group culture 3.849** 1.752**
Level 2"

Intercept (1o) Regionl 2.668** Regionl 0.797*

Region2 1.557* Firm2 -1.059*
Firml -1.891 *
Firn2 - 2.209*
Ranki workers Firml 3.685**
Rank2 middle managers Firml 2.329*
Change salience
Change valence Firml 0.952**
Firm2 0.651t
Change inference Region2 -0.598t
Developmental culture Firml -1.284t
Group culture Regionl -1.446*

"for simplicity of presentation, only sig

**p < .01; *p < .05; tp < .1; regionl
developed region; firml = collectives; fi

higher valence and less

from research skeptical
in risk taking behavior. ab
change. When in risk, people are motivated to
The results suggest that there are vari- engage in risk adjustment strategies so as
ations in change schemas within a firm. to exercise ex ante and ex post control
Sharp contrasts are found between se- (Wehrung, Lee, Tse, and Vertinsky,
nior managers, middle managers, and 1989).
workers in all three schema dimensions. Organizational changes are often char-
As predicted, people with more change acterized by interactions of groups with
experiences and more freedom to changediverse cognition (O'Reilly et al., 1995;
will have a more positive change Scott, 1995). The current study advances
schema. If they have less control overthe knowledge about causes of these di-
change, a more negative evaluation willverse cognitions. Institutional forces at
emerge. While this finding differs from societal and firm levels are found to be
those of other change schema studies important predictors. Contextual factors
(Lau and Woodman, 1995; Walsh, 1995), such as economic development, firm
the findings agree with implications ownership, and organizational cultures

546 JOURNAL OF INTERNATIONAL BUSINESS STUDIE

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 CHUNG-MING LAU, DAVID K. TSE, NAN ZHOU

are important factors to firm change be- assess firm-specific effects. These firm-
havior as hypothesized. specific changes will likely shape em-
As predicted, a positive change schema ployees' cognitive maps. Within the cur-
is found to have favorable influence on rent research of the cognitive process of
job satisfaction and firm commitmenttop af- management team and firm strategic
ter we controlled for the institutional in- orientations (Hambrick et al., 1993; Ra-
fluences. The results suggested that ourjagopalan, Rasheed, and Datta, 1993),
current approach to firm commitmentour institutional and contextual ap-
and job satisfaction research for firms inproach may help unfold how top man-
transition, though have high explanatory agement team is constrained by their or-
power, can further be improved. By look- ganizational contexts as they develop
ing at the change schemas and organiza- their decision schema.
tional culture, more information about As China is opening up after joining
the job attitudes and employee perfor- the WTO, firms have to manage their
mance could be added. human resources to face the new chal-
We examined the role of cognition lenges.
(in- In order to remain competitiv
the firms have to better understand indi-
dividual change schemas) in the change
process in a transitional economy, anviduals'
is- reactions to changes, and their
sue that has not been explored in commitment
past and job satisfaction during
studies. The study confirms the linksthebe-change process. Ownership and re-
tween change schema to firm commit- gional differences alone are not suffi-
cient enough to influence individual at-
ment and to job satisfaction. Individuals
titudes.
with higher change salience and valence
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