Structural Differentiation and Nonmarket Strategy Performance: An Empirical Study of the Effects of Organizational Choice in the Pursuit of Regulatory Approval for New Wind Farms

Abstract

This thesis focuses on the relationship between organisational design and the strategic performance of firms in nonmarket environments. Nonmarket strategy is the field of strategy research which focuses on the management of stakeholders that lay outside the organization's value chain of employees, suppliers, partners, and customers. Examples of nonmarket stakeholders are local communities and regulators. Nonmarket strategy therefore relates to stakeholder engagement, environmental politics, industry self-regulation, and corporate social responsibility. Whilst management scholarship has extensively linked organisational choice, environment, and firm performance in market environments, we still know little as to the relationship between organization choice and firm performance of nonmarket strategy. Crucially, firms that operate in nonmarket environments face two sets of demands: one from the organization's value chain, so the market; and one from the nonmarket environment, and thus from stakeholders outside the value chain. To advance understanding on this organisational problem, two empirical papers and a companion methods paper are presented in this thesis. The empirical setting that informs this research is the wind energy development sector in the UK. Our dataset consists of over 19,000 planning documents from 187 projects which were initiated by 32 private firms between 2010 and 2015 in the UK. The first paper, the methods paper, performs a literature review of text mining in order to uncover how this method can be of value to management studies. Text mining was central to the thesis. Machine learning algorithms were used in the empirical papers to convert textual planning data into a stakeholder sentiment and the methods paper explores how text mining may be relevant to the broader management field. The second paper explores how organizational choice impacts organizational performance in nonmarket environments. Specifically, we analyse the choice to pursue a differentiated organizational structure versus an integrated structure in the pursuit of regulatory approval. We define a differentiated structure as a firm which outsources their nonmarket competences beyond the boundary of the firm. In contrast, an integrated structure is one where both are integrated under the same hierarchy. This study suggests that integrated firms are more effective at creating a positive stakeholder sentiment in contentious regulated environments vis-a-vis differentiated firms. We then show how a positive stakeholder sentiment is positively related to a firm's chances of acquiring regulatory approval, linking an integrated structure with performance benefits in nonmarket environments. The third paper analyses how organisational structure affects decisions to terminate new project developments in nonmarket environments. In contrast to the second paper, we find that firms which are structurally differentiated are more effective than integrated firms at terminating projects in response to negative signals from the environment (a negative stakeholder sentiment). Thus, we see competing demands for differentiation and integration emerge when organising for nonmarket environments. Taken together, the two empirical papers further our understanding of how organisational structure choice impacts strategic decisions in nonmarket environments.

Date of Award	29 Jun 2020
Original language	English
Awarding Institution	The University of Manchester
Supervisor	Nuno Gil (Main Supervisor) & Silvia Massini (Co Supervisor)