Leadership Oct 1, 2011

Dimen­sions of Diffusion

Com­pa­ny to com­pa­ny, busi­ness prac­tices sel­dom remain the same

Based on the research of

Shazad Ansari

Peer C. Fiss

Edward J. Zajac

A num­ber of years ago,Ed Zajac was in Ger­many teach­ing a exec­u­tive edu­ca­tion course on cor­po­rate gov­er­nance. While perus­ing the local paper one morn­ing, the Frank­furter All­ge­meine Zeitung or FAZ, he stum­bled across an arti­cle on share­hold­er val­ue. Zajac, who speaks and reads Ger­man flu­ent­ly, was struck by some­thing he read — not the con­tent per se, but the lan­guage in which it was writ­ten. Tucked amidst the long Ger­man words was an Eng­lish loan­word, share­hold­er value.”

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The fact that they wouldn’t even have a Ger­man word for it to me was quite telling,” says Zajac, a pro­fes­sor of man­age­ment and orga­ni­za­tions at the Kel­logg School of Man­age­ment. Share­hold­er val­ue was rel­a­tive­ly new to Ger­many, a fact that the loan­word reflect­ed. Lan­guages often bor­row new terms from oth­er lan­guages unmod­i­fied. In Eng­lish, com­mon loan­words may be alo­ha” from Hawai­ian or avant-garde,” faux pas,” and omelette” from French. These words are relics of cul­tur­al exchanges, where one cul­ture has adopt­ed the tra­di­tions or prac­tices of anoth­er. The nature of the adop­tion, though, can vary. A French omelette, for exam­ple, may be sim­i­lar to an Amer­i­can one but quite dif­fer­ent from an Indi­an interpretation.

As with cul­tur­al arti­facts, busi­ness prac­tices like share­hold­er val­ue are not teth­ered to the place where they began. It is not uncom­mon to find firms from Japan to South Africa to Brazil espous­ing their com­mit­ment to their share­hold­ers. Every­one appears to be speak­ing the same lan­guage. But just as an Indi­an omelette may bear lit­tle resem­blance to its French inspi­ra­tion, busi­ness prac­tices are often adapt­ed to fit the cul­tures that host them.

Map­ping Adop­tion

That share­hold­er val­ue” is in the Ger­man dic­tio­nary is a sign that share­hold­er pri­ma­cy has caught on in that coun­try. But it doesn’t tell you how it has been adapt­ed to fit their cul­ture. As Zajac says, the notion that a sub­group of indi­vid­u­als like share­hold­ers have pri­ma­cy among stake­hold­er groups wouldn’t nec­es­sar­i­ly square very well with Ger­mans, who are brought up to believe that busi­ness inter­ests are inter­wo­ven with com­mu­ni­ty inter­ests.” The prac­tice was nonethe­less adopt­ed because Ger­man com­pa­nies felt pres­sure from peer com­pa­nies and investors, but not in the same way as it was among Amer­i­can com­pa­nies. Ger­man com­pa­nies tried to cush­ion the blow by talk­ing about it as a har­mo­nious com­ing togeth­er of mul­ti­ple objec­tives, where­by the pur­suit of one would not lead to a diminu­tion of the oth­er,” Zajac says. The idea is that we can main­tain both a share­hold­er and a stake­hold­er orientation.”

Zajac’s obser­va­tion led him and his then-doc­tor­al stu­dent Peer Fiss, now an asso­ciate pro­fes­sor at the Uni­ver­si­ty of South­ern Cal­i­for­nia, to more ful­ly exam­ine the Ger­man adop­tion and sub­se­quent adap­ta­tion of the share­hold­er val­ue ori­en­ta­tion. These stud­ies led to anoth­er paper that is broad­er in scope. Along with co-author Shahzad Ansari, a uni­ver­si­ty lec­tur­er at the Uni­ver­si­ty of Cam­bridge, they pro­posed a detailed frame­work by which oth­er researchers can pre­dict and cat­e­go­rize how busi­ness prac­tices change as they are adopt­ed in dif­fer­ent firms, soci­eties, and cultures.

Zajac and his col­leagues use two descrip­tors, fideli­ty and exten­sive­ness, to char­ac­ter­ize a firm’s adop­tion and adap­ta­tion of a busi­ness prac­tice. Zajac bor­rowed the first term from his musi­cal past, liken­ing it to high fideli­ty, which is, does it sound like the orig­i­nal record­ing? Is the repro­duc­tion real­ly like the orig­i­nal or is it some­how mod­i­fied?” He defines exten­sive­ness more as the scope with which you would adopt a practice.”

We thought it would be inter­est­ing and use­ful to be able to map the idea of adap­ta­tion,” Zajac says. That map is best under­stood by plac­ing the two vari­ables each on their own axis, with fideli­ty run­ning ver­ti­cal­ly and exten­sive­ness run­ning hor­i­zon­tal­ly (Fig­ure 1). The two dimen­sions cap­ture the full range of prac­tice vari­abil­i­ty and adap­ta­tion. Those firms that stick true to the orig­i­nal prac­tice and adopt it through­out the com­pa­ny are said to have a full and true adap­ta­tion — they occu­py the upper-right cor­ner of the fideli­ty-exten­sive­ness graph. Those that par­tial­ly adopt a low-fideli­ty ver­sion occu­py the low­er-left corner.

Fig­ure 1. Dimen­sions of prac­tice vari­abil­i­ty and adap­ta­tion.

Pos­si­ble Pit­falls

Clas­si­fy­ing busi­ness prac­tice adop­tion by its vari­abil­i­ty and vari­a­tion does not tell the whole sto­ry, though. Firms may strug­gle to imple­ment a new process, and in the course of those strug­gles change the process to meet spe­cif­ic needs. Zajac and his col­leagues out­line three poten­tial hur­dles a com­pa­ny may face when imple­ment­ing a new busi­ness practice.

If a prac­tice does not match well with the cul­tur­al beliefs of a firm’s employ­ees, it will be adapt­ed to meet their needs.

The first is tech­ni­cal fit, where a firm either has or lacks the infra­struc­ture and know-how to adopt a prac­tice. For exam­ple, GE was more suc­cess­ful in imple­ment­ing Six Sig­ma than Motoro­la even though Motoro­la devel­oped the strat­e­gy. This is in part because GE already had their own col­lec­tion of qual­i­ty man­age­ment tools in place where Motoro­la did not.

Cul­tur­al fit is anoth­er poten­tial pit­fall. If a prac­tice does not match well with the cul­tur­al beliefs of a firm’s employ­ees, it will be adapt­ed to meet their needs. In the case of cul­tur­al fit, when a busi­ness adopts a prac­tice it affects how it is adapt­ed. Ear­ly adopters are much freer to exper­i­ment with a prac­tice, hav­ing lit­tle in the way of prece­dent to guide them. They are also more like­ly to push the process through­out the firm. Lat­er users do not have the same lee­way, in part due to pres­sure from oth­er suc­cess­ful imple­men­ta­tions. And while late adopters may imple­ment high­er-fideli­ty ver­sions, they tend to do so less exten­sive­ly. The final obsta­cle to busi­ness prac­tice adop­tion is polit­i­cal fit. It is sim­i­lar to cul­tur­al fit in the way it influ­ences adop­tion, but involves office pol­i­tics rather than cul­tur­al norms. 

Each type of mis­fit exerts its own influ­ence on how the prac­tice is adopt­ed and adapt­ed. If there’s lack of tech­ni­cal fit, there may be a pat­tern of adap­ta­tion that’s a bit dif­fer­ent than if you have a lack of cul­tur­al fit or polit­i­cal fit,” Zajac remarks. The com­bi­na­tion of fideli­ty, exten­sive­ness, tim­ing, and types of fit can all inter­act, which led Zajac and his col­leagues to out­line a num­ber of propo­si­tions that can be test­ed by the many researchers work­ing with large, mul­ti-year data sets to assess com­pa­nies and their adop­tion of spe­cif­ic busi­ness practices.

Shed­ding Light

Zajac and his col­leagues’ frame­work can help dis­pel cer­tain myths, such as the belief that ear­ly adopters and fast fol­low­ers are both hew­ing to the same prac­tice. Accord­ing to the frame­work, that would like­ly prove the excep­tion rather than the rule giv­en the vagaries of cul­tur­al and polit­i­cal mis­fit. What we’re say­ing is that the tim­ing itself prob­a­bly implies a dif­fer­ent type of adap­ta­tion,” Zajac says. With the frame­work, researchers can also ver­i­fy which com­pa­nies are mere­ly claim­ing they have adopt­ed a prac­tice and which have actu­al­ly done so. Fur­ther­more, peo­ple can think more sci­en­tif­i­cal­ly about busi­ness prac­tices by using the frame­work, allow­ing them to dis­tin­guish between low-fideli­ty adap­ta­tions and those dif­fer­ent enough to be con­sid­ered an entire­ly new practice. 

We think the applic­a­bil­i­ty of our frame­work can be far-reach­ing because there are so many dif­fus­ing man­age­ment prac­tices and ideas,” Zajac says. We will nev­er run out of prac­tices to study as long as there is inno­va­tion.” Beyond that, the work that he and his col­leagues have done reminds man­age­ment sci­en­tists and prac­ti­tion­ers alike that cul­ture plays an impor­tant role in the busi­ness world. Peo­ple often implic­it­ly or explic­it­ly assume that good ideas’ are accept­ed by large­ly anony­mous actors with sim­i­lar pref­er­ences every­where around the world,” he says. But the prism with which these actors eval­u­ate options and oppor­tu­ni­ties is shaped by their cul­tur­al and orga­ni­za­tion­al back­grounds and experiences.”

Relat­ed read­ing on Kel­logg Insight

Devel­op­ing Stock Exchanges in Devel­op­ing Coun­tries: The impe­tus for a new stock exchange can deter­mine its fate

Does Func­tion Fol­low Orga­ni­za­tion­al Form? Lend­ing prac­tices of large and small banks

Featured Faculty

Edward J. Zajac

James F. Bere Professor of Management & Organizations

About the Writer

Tim De Chant was science writer and editor of Kellogg Insight between 2009 and 2012.

About the Research

Ansari, Shazad, Peer C. Fiss, and Edward Zajac. 2009. Made to Fit: How Practices Vary As They Diffuse. Academy of Management Review 35: 67-92.

Read the original

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