Lost in Perception - A case study of how constituents perceive strategic responses

Abstract: The organizational environment has become increasingly complex as organizations face demands and pressures from many different constituents at the same time. Organizations also need to demonstrate that they are legitimate actors that pursue goals in a socially acceptable manner. The problematic nature of legitimacy raises the importance of strategic considerations in meeting the expectations. Thus, many researchers have focused on understanding the relationship between institutional complexity and organizational responses in order to clarify strategic considerations. Oliver presented a model that outlines available response strategies and tactics for organizations faced with external pressures (Oliver, 1991). However there have been inconsistencies in how strategies are perceived. Since it is constituents who grant legitimacy it is also their point-of-view that matters when strategic responses are perceived. However, perception as influenced from the point-of-view remains to be an unexplored issue. Given the above, our aim with the study was to understand how constituents perceive strategic responses formed by a focal organization and where divergent perceptions come from. The study took place in Hungary in the public sector where we found a water-supplying subsidiary, controlled by a Municipality owned Holding. This organization was surrounded by five important constituent groups that exerted demands and pressures on it. We used an abductive five-step approach to study this phenomenon by first gathering data on the pressures the focal organization was facing and then analyzing it to identify strategic responses. Thereafter we moved onto investigating the constituents and gathered data on their perceptions of the strategic responses. As a last step we analyzed the perceptions and categorized them into strategy-tactics to see how constituents differed based on their point-of-view and compared it to the focal organization to observe differences. We were able to determine response strategies on both a strategy and tactic level and as a result of our analysis we created a model that assessed the constituents' point-of-view. As a matter of fact, our findings show that strategies do change according to the point-of-view. Furthermore, the findings indicate that shared perceptions heavily rely on the degree of institutional ties and the inherent institutional logics. When we looked upon perceived positivity and negativity, the findings also justified the existence of the previously suggested inconsistency regarding the Manipulation strategy. However, contrary to those studies, our findings show that the Compromise strategy is subject to the same type of inconsistency as Manipulation. Taken these findings into account we derived managerial implications for strategic considerations.