Environmental Turbulence and Organizational Change: Niche Expansion and Organizational Growth in the Population of Hospitals in Korea, 1980-2008

Abstract

This paper combines structural inertia theory with various theoretical perspectives to explain the process of organizational change in the population of hospitals in Korea from 1980 to 2008: specifically, how environmental conditions facilitate a hospital’s niche expansion defined as the addition of clinical service departments and how environmental conditions mediate the effects of niche expansion on the rates of organizational growth. The paper proposes that environmental turbulence caused by pivotal institutional transformations and changes in market competitiveness creates opportunities for organizations to cultivate new market niches by enabling them to overcome inertial pressures. It also proposes that because of the high level of uncertainty entailed in environmental turbulence, however, the organization that expands into new market niches under turbulent environments have more difficulty with further organizational growth than one that does under stable environmental conditions. Analyses of the rates of niche expansion and organizational growth in the hospital industry support such propositions. We discuss the implications of these findings, which indicate that renewed attention should be paid to structural inertia theory and organizational change research.