Strategic Change in a Shifting Institutional Context

The study of how firms change their strategic behavior is extensive, yet little research has been performed on strategic change in a transitional context. This study seeks to broaden understanding of strategic behavior by contrasting the strategic choices of firms operating in the more-developed eastern China against firms operating in the less-developed western China. In these varying institutional settings, findings suggest that changes in a firm's strategic pattern can be described using Miles and Snow's typology. Change patterns are determined by institutional characteristics and are associated with firm capabilities. The findings also show that, even though capabilities appear to be similar, east-based firms tend to make choices that are less defensive and more risky, while west-based firms select more risk-averse options. These findings are important for the design of major change, in particular, in institutionally differentiated environments, such as those in Europe. The findings also suggest that future research on strategic change should take into account environment heterogeneity and the effect of change on firm performance.