ffirs.qxd 2/11/08 14:44 Page v Corporate Co-evolution A POLITICAL PERSPECTIVE Suzana B. Rodrigues and John Child Corporate Co-Evolution: A Political Perspectiv e Suzana B. Rodrigues and John Child © 2008 by Suzana B. Rodrigues and John Child. ISBN: 978-1-405-12164-4 ffirs.qxd 2/12/08 11:04 Page i Further praise for Corporate Co-evolution “Based on a longitudinal, multi-level field study of the co-evolution of the Brazilian telecom- munications company Telemig and its environment, Rodrigues and Child lay the ground- work for a political interest theory of co-evolution. In particular, they elucidate the ideational and material factors that shape the changing distribution of power, and the associated legal and psychological contracts, among organizational interest groups that helps shape organiza- tional evolution over time. Their thoroughly-researched study begins to fill an important lacuna in the growing literature on evolutionary organization theory.” Robert A. Burgelman, Edmund W. Littlefield Professor of Management, Stanford University Graduate School of Business, and author of Strategy is Destiny: How Strategy-Making Shapes and Organization’s Future, Free Press, 2002 “This book is a masterpiece case study covering over two decades of an organization, carefully conducted and showing that cases are still a major source to look deeply into organizational processes and dynamics.” Carlos Osmar Bertero, São Paulo School of Management/Getúlio Vargas Founda- tion and President of the Brazilian Academy of Management “Rodrigues and Child demonstrate the power of historical thinking in their richly detailed analysis of how the Brazilian telecommunications company, Telemig. Using archival mater- ials, interviews, and a wealth of other information, they put the transformation of Telemig into historical context, drawing on concepts and principles from the resource dependence and political economy views concerning the relationship between organizations and their environ- ments. Along the way, they have extremely interesting things to say about corporate identity, organizational learning, and organizational legitimacy.” Howard Aldrich, Kenan-Flagler Business School, University of North Carolina, Chapel Hill “Single theme explanations of the adaptation-selection phenomenon have reached their limit. Researchers have tended not to address the interrelationships between firm-level adaptation and population-level selection. This relevant and timely book is an exception. It advances the theory of co-evolution by incorporating a political dimension of how organizations are transformed into new forms.” Professor Henk W. Volberda, RSM Erasmus University ffirs.qxd 2/11/08 14:44 Page iii Corporate Co-evolution ffirs.qxd 2/11/08 14:44 Page iv Organization and Strategy Series editors John Child and Suzana B. Rodrigues Books published: Silvia Gherardi Organizational Knowledge: The Texture of Workplace Learning Stephen Todd Rudman The Multinational Corporation in China: Controlling Interests Suzana B. Rodrigues and John Child Corporate Co-Evolution: A Political Perspective ffirs.qxd 2/11/08 14:44 Page v Corporate Co-evolution A POLITICAL PERSPECTIVE Suzana B. Rodrigues and John Child ffirs.qxd 2/11/08 14:44 Page vi Copyright © 2008 by Suzana B. Rodrigues and John Child Published by John Wiley & Sons Ltd, The Atrium, Southern Gate, Chichester, West Sussex PO19 8SQ, England Telephone (+44) 1243 779777 Email (for orders and customer service enquiries): [email protected] Visit our Home Page on www.wiley.com The right of Suzana B. Rodrigues and John Child to be identified as the authors of this work has been asserted in accordance with the UK Copyright, Designs, and Patents Act 1988. All Rights Reserved. No part of this publication may be reproduced, stored in a retrieval system or transmitted in any form or by any means, electronic, mechanical, photocopying, recording, scanning or otherwise, except under the terms of the Copyright, Designs and Patents Act 1988 or under the terms of a licence issued by the Copyright Licensing Agency Ltd, 90 Tottenham Court Road, London W1T 4LP, UK, without the permission in writing of the Publisher. Requests to the Publisher should be addressed to the Permissions Department, John Wiley & Sons Ltd, The Atrium, Southern Gate, Chichester, West Sussex PO19 8SQ, England, or emailed to [email protected], or faxed to (+44) 1243 770620. Designations used by companies to distinguish their products are often claimed as trademarks. All brand names and product names used in this book are trade names, service marks, trademarks or registered trademarks of their respective owners. The Publisher is not associated with any product or vendor mentioned in this book. This publication is designed to provide accurate and authoritative information in regard to the subject matter covered. It is sold on the understanding that the Publisher is not engaged in rendering professional services. If professional advice or other expert assistance is required, the services of a competent professional should be sought. Other Wiley Editorial Offices John Wiley & Sons Inc., 111 River Street, Hoboken, NJ 07030, USA Jossey-Bass, 989 Market Street, San Francisco, CA 94103-1741, USA Wiley-VCH Verlag GmbH, Boschstr. 12, D-69469 Weinheim, Germany John Wiley & Sons Australia Ltd, 42 McDougall Street, Milton, Queensland 4064, Australia John Wiley & Sons (Asia) Pte Ltd, 2 Clementi Loop #02-01, Jin Xing Distripark, Singapore 129809 John Wiley & Sons Canada Ltd, 6045 Freemont Blvd, Mississauga, ONT, L5R 4J3, Canada Wiley also publishes its books in a variety of electronic formats. Some content that appears in print may not be available in electronic books. Library of Congress Cataloging-in-Publication Data Rodrigues, Suzana B. Corporate co-evolution : a political perspective/by Suzana B. Rodrigues and John Child. p. cm.—(Organization and strategy) Includes bibliographical references and index. ISBN 978-1-4051-2164-4 (hbk. : alk. paper) 1. Telemig (Firm)—History. 2. Telephone companies—Brazil—Minas Gerais—History. 3. Telecommunication—Brazil—Minas Gerais—History. I. Child, John, 1940– II. Title. HE9050.T455R63 2008 384.6065′8151—dc22 2007019131 British Library Cataloguing in Publication Data A catalogue record for this book is available from the British Library ISBN 978-1-4051-2164-4 (HB) Typeset in 11/13pt Bembo by Graphicraft Limited, Hong Kong Printed and bound in Great Britain by Antony Rowe Ltd, Chippenham, Wiltshire This book is printed on acid-free paper responsibly manufactured from sustainable forestry in which at least two trees are planted for each one used for paper production. ftoc.qxd 2/11/08 14:45 Page vii Contents Series Editors’ Foreword ix Preface xi Part I Introduction 1 1 Perspectives on Corporate Co-evolution 3 2 The Economic and Political Context of Telecommunications in Brazil 27 3 Scope and Method 46 Part II Historical Co-evolution of Telemig 55 4 Foundations 1953–1985 57 5 Politicization 1985–1993 92 6 Reconstruction and Demise 1993–2000 115 Part III Multidimensional Co-evolution 145 7 Organizational Culture 147 8 Corporate Identity 171 9 Metaphors and Reflective Imaging 200 10 The Politics of Learning at a Time of Restructuring 226 Part IV Conclusion 245 11 A Political Interest Theory of Corporate Co-evolution 247 Author index 273 Subject index 275 flast.qxd 2/11/08 14:45 Page ix Series Editors’ Foreword Blackwell’s Organization and Strategy series publishes works of major scholarship based on case studies. It recognizes that case studies offer a unique opportunity to provide an in-depth and holistic understanding of organization and strategy in its context. They offer this contribution through detailed investigation that is longi- tudinal and/or closely compares key examples. Longitudinal investigation can uncover the dynamics of change, the way that change pervades different levels of organ- ization, and patterns of emergence. Close comparisons between cases can map in detail the nature of variation within a category of organizations. Both types of investigation can also derive lessons from how organizational and strategic innova- tions have been introduced and their effects. In this way, case studies address the problem that Andrew Pettigrew noted in his book The Awakening Giant (Blackwell, 1985), namely that the lack of a holistic approach, sensitive to both context and history, has seriously limited our under- standing of both organizations and their strategies. It is therefore intended that books in this series adopt a holistic perspective that examines the interplay between a range of salient aspects and from several theoretical perspectives. The books should be contextually embedded and, where appropriate, take account of the relevant historical background. They should make an original contribution to theory and offer implications for policy and practice. Further details on the requirements for manuscripts to be considered for pub- lication in the Organization and Strategy series are available from the Publisher, Business and Management, at Blackwell Publishing. John Child and Suzana B. Rodrigues flast.qxd 2/11/08 14:45 Page xi Preface Corporate Co-evolution addresses a theme that is currently attracting a great deal of interest for the new insights it promises into the way organizations develop in inter- action with their environments. While this book has a strong contemporary appeal, it actually emerges from a very extensive period of preparation. It builds on research undertaken over a time-span of twenty-one years. It also results from a long aca- demic partnership between its two authors, the fruit of which is the distinctively political analysis we apply to co-evolution. We have accumulated many debts of gratitude during these years both to members of Telemig, the company on which the study focuses, and to colleagues and friends in many countries who have helped us more than they realize with advice, encour- agement and the inspiration of their own thinking. In this short Preface, we wish to explain the book’s genesis and to acknowledge the support we have received. The origins of Corporate Co-evolution go back to 1986, when Suzana Rodrigues embarked on a study of strategic decision-making within Telemig, then the state- owned telecommunications company for the state of Minas Gerais in Brazil. This study was initially an extension of the doctoral research she had undertaken under David Hickson at the University of Bradford. She conducted the investigation at a time when, following the return of Brazil from military to democratic rule, state- owned enterprises were operating under turbulent conditions. It became clear that in order to understand the process of making strategic decisions within Telemig, account had to be taken of the company’s socio-political context as well as its his- torical origins. As a state-owned company in a highly regulated sector, its institu- tional environment was of particular significance. The discovery of Christine Oliver’s work enhanced Suzana’s awareness of the role of institutions in promoting organizational change and also how organizational leaders can in turn influence institutional policies. She also appreciated from Andrew Pettigrew’s work on continuity and change in ICI that one could only make sense of organizational transformation through the adoption of a contextual and his- torical perspective. A Fulbright Scholarship to the United States in 1985 had offered Suzana the opportunity to become directly acquainted with emerging American flast.qxd 2/11/08 14:45 Page xii xii PREFACE thinking on organizational evolution especially that of Aldrich, Freeman and Hannan’s work on population ecology, and the institutional perspectives of DiMaggio, Granovetter, Powell and Scott. Within Brazil, certain scholars were by the late 1980s starting to develop an interest in organization culture, notably M.T. Fleury, M. Mello, C. Bertero and C. Machado. Stimulated by this trend, Suzana’s access to Telemig’s board allowed her to extend her research to the development of the company’s identity and cul- ture. This first period of investigation into Telemig, undertaken between 1986 and 1990, brought together various facets of the company’s change, applying a range of theoretical perspectives. It was formally submitted to UFMG [the Federal University of Minas Gerais] in support of a full professorship which was conferred on Suzana in 1990. From the beginning of the 1990s, John Child became part of the story behind this book. Having, with Chris Smith, just completed a longitudinal study of trans- formation in Cadbury’s, the confectionary company, he was convinced of the spe- cial value of carefully conducted longitudinal research for understanding corporate change. He also brought with him the political orientation he had earlier devel- oped in his analysis of strategic choice. John’s main contribution at this point was to encourage Suzana to continue engaging with Telemig’s evolution and in this way to maintain continuity with her previous work. In 1996, Suzana therefore returned to Telemig together with three of her doctoral students, Augusto Cabral, Alexandre Carrieri and Talita da Luz. They were able to chart the changes had taken place since the 1990s and to extend the range of enquiry to include restruc- turing, changes in formal and informal employment contracts, the role of organ- izational learning in restructuring, and the changing images of the company being portrayed by its union through the use of metaphor. This second stage of research was completed in 2000. From 2001, when Suzana accepted a position at the University of Birmingham, she and John began to work intensively in making sense of the data and in col- lecting further information for this book. Even though the company had by now lost its own identity, Suzana’s contacts with Telemig’s former directors, managers and trade union officials facilitated meetings and interviews with them to furnish further information and insight right up until 2006. Our debt of gratitude to these many individuals who gave so generously of their time, records and personal insights is beyond estimation. Corporate Co-evolution has resulted from the many long discussions we have had about the interactions of Telemig’s with its institutional environment and how both company and environment co-evolved. We were particularly seeking to under- stand the role of managerial intentionality in a highly institutionalized environ- ment. It was natural to espouse the new co-evolutionary perspective as the means of framing these dynamics. Its longitudinal approach together with the study of the recursive loops of interaction between the organizations and its context per- mits one to see beyond the limits of previous perspectives. Both of us had noted McKelvey’s early insistence that all organizational evolution was co-evolution, but