Cultural Entrepreneurship: Between-Organization Cultural Isomorphism and Within-Organization Culture Shaping

Abstract

Cultural entrepreneurship is a process that focuses on entrepreneurial resources, identifies and legitimates new startups, and improves organizational performance. Although scholars of this subject have viewed entrepreneurs as cultural agents, for example, who either strike a balance between cultural resources and constraints or decouple their ventures from cultural constraints while coupling them with cultural resources, they have overlooked another possible behavior that cultural agents might display. In the present study, the authors attempt to uncover another facet of cultural entrepreneurship and conduct a case study focusing on a new entrepreneurial organization (subcontractor) that became a parts supplier for an automaker (user company). Our findings show that the subcontractor’s entrepreneurs shaped its culture by drawing on the external cultural constraints coded by the user company’s culture (between-organization cultural isomorphism), and they also used internal cultural resources to foster an entrepreneurial culture and to stimulate exploratory innovations (within-organization culture shaping).

Keywords

cultural entrepreneurship cultural isomorphism culture shaping user company subcontractor

Introduction

For the last two decades, organization scholars have attempted to understand entrepreneurship within the perspective of organizational culture. Lounsbury and Glynn (2001) introduced the cultural perspective to the entrepreneurship literature by presenting the notion of cultural entrepreneurship, which refers to a process that focuses on entrepreneurial resources, identifies and legitimates new startups, and improves organizational performance. As a result, many cultural entrepreneurship scholars now view entrepreneurs as cultural agents (cf. bricoleurs; e.g., Baker & Nelson, 2005; Rao et al., 2005). For example, O’Neil and Ucbasaran (2016) suggested that a cultural entrepreneur strikes a balance between cultural resources and constraints. Überbacher et al. (2015) proposed that a cultural entrepreneur decouples his or her venture from cultural constraints while coupling it with cultural resources. However, researchers have overlooked another possible behavior that a cultural agent might display. In the present study, the authors attempt to uncover another facet of the cultural entrepreneur later labeled a cultural game player, which refers to an entrepreneur who actively judges and chooses appropriate behaviors—either balancing or decoupling (Kim et al., 2016).

Earlier studies adopting cultural approaches to organization have emphasized the structure of culture as a collective meaning system and a cultural process (e.g., Barley, 1983; Hofstede, 1980; Van Maanen, 1979). They considered the concept of culture to be related to “fairly stable, encompassing, and often internalized constraints on individual thought and action,” thereby highlighting “cultural persistence and coherence”; this research stream viewed culture as a constraint on action (Weber & Dacin, 2011, p. 1). However, later studies extended the concept of culture from endogenized constraints to resources for strategic actions. For example, individuals or organizations can select and use “cultural toolkits” such as “symbols, stories, rituals, and worldviews” (Swidler, 1986, p. 273) to develop strategies or actions to cope with different situations (Rindova et al., 2011). These two research streams present a dichotomous dimension, “cultural agency, which is understanding culture predominantly as a constraint on action versus a resource for action” (Weber & Dacin, 2011, p. 3).

Another research stream posits a different dimension, cultural context, which refers to an understanding of the sphere where cultural sense making or interactions occur either within a single social group or across different social groups (e.g., Fiss & Zajac, 2004; Gioia & Chittipeddi, 1991; Hannan et al., 2007; Meyer et al., 1997; Westphal & Zajac, 1998; Zuckerman, 1999). The cultural context can also be divided into two: the internal cultural context, or “private culture (symbolic interactions among members of a social group),” and the external cultural context, or “public culture (cultural processes involving external audiences that observe and evaluate members but do not directly participate)” (Weber & Dacin, 2011, p. 2).

Most studies on cultural entrepreneurship have adopted this well-developed cultural framework, which is composed of four domains in a two-by-two matrix comprising two dimensions: cultural agency (either constraints or resources) and cultural context (either internal or external). These academic papers thus seemed effectively to disentangle the cultural behaviors that entrepreneurs display in terms of organizational identity, legitimacy, and performance (e.g., balancing, coupling, and decoupling; O’Neil and Ucbasaran, 2016; Überbacher et al., 2015). In practice, however, there is another cultural behavioral pattern that entrepreneurs may adopt.

Take, for example, a startup company that is a parts supplier for an automaker. The user company (automaker) is a powerful evaluator that purchases the products of its subcontractor (startup parts supplier). Its subcontractor is usually nervous not only about whether it meets the user company’s target price and quality but also about how appropriately it harmonizes with the user company’s social codes, follows isomorphic pressure, and deploys good impression management (Weber & Dacin, 2011). In this sense, the subcontractor can be considered to face external cultural constraints. However, as the subcontractor is a startup company, its top management team (TMT) might be composed of entrepreneurs who dominantly use internal cultural resources, such as a cultural toolkit (e.g., storytelling, rituals), with its internal group or employees. In this example, the startup subcontractor is subject to external cultural constraints, but it can utilize internal cultural resources at the same time: the authors call the former process of cultural entrepreneurship between-organization cultural isomorphism and the latter within-organization culture shaping.

More conspicuously, a majority of management scientists and practitioners have attributed the success of Korean, Japanese, and Chinese firms in global markets to the Confucian culture, characterized by high levels of collectivism, seniority orientation, and power distance (Hofstede, 2001; Leung, 2007). Recently, however, some researchers have emphasized cultural distinctiveness in organizations rather than cultural similarities across these East Asian countries. For instance, although Samsung and Hyundai are large Korean global conglomerates, Samsung’s leadership and management style are considerably different from Hyundai’s but rather similar to a Japanese business model mixed with Western best practices (Shim & Steers, 2012). In particular, these scholars (i.e., Shim & Steers, 2012), by cautioning against overgeneralization of the role of national cultures in organizational behavior, have called for studies of the cultural transfer of globalized Korean or Japanese firms to their subsidiaries or others. For these reasons, the authors believe that a case study on organization culture transfer is the best approach to discovering “black swans” in a lake in which the effects of national culture have been overemphasized (Flyvbjerg, 2006, p. 228).

In the present research, the authors attempt to reveal how external cultural constraints influence an entrepreneurial organization and how its entrepreneurs use internal cultural resources to foster and strengthen entrepreneurial culture and to stimulate exploratory innovations, referring to an organization’s risk-taking behaviors in terms of using or implementing new business practices (cf. exploration; March, 1991). To this end, the authors raise the following research question: How do entrepreneurs transform external cultural constraints into internal cultural resources to enable its legitimacy and future survival? In the following, this article begins by describing the inductive, qualitative methodology that the authors adopted in the present study. Then, this article presents the findings, theoretical contributions, practical implications, and limitations.

Method

The authors employed a qualitative methodology to uncover the relationships among the TMT’s entrepreneurship, entrepreneurial culture, and (exploratory) innovations in a startup company that has been a subcontractor of a large-scale user company since 1992, when it was established. Generally, culture shaping in a startup company is a time-consuming process, and thus, a qualitative methodology can be a suitable approach to explicate how the process proceeded (Berg et al., 2010) and how the TMT’s entrepreneurship has influenced entrepreneurial culture and exploratory innovations in the long run. Specifically, the authors adopted broader qualitative approaches (Hill & McGowan, 1999), such as the triangulation method (i.e., interviews, archival data, and observations), to collect “converging evidence from different sources” to strengthen the study validity (Yin, 2011, p. 79). In management research, building a theory from rich qualitative evidence has gained a strong foothold (Eisenhardt & Graebner, 2007). In the following, the authors start by describing the company backgrounds of the user company and the subcontractor.

Company Backgrounds: The User Company and the Subcontractor

The user company is Hyundai Mobis, an affiliate of Hyundai Motor Company (HMC) group, which timely and exclusively supplies not only auto parts modules to HMC’s production lines but also spare parts to repair shops across the globe. It ranked sixth in the global original equipment manufacturer (OEM) parts supplier, generating US$31.4 billion and hiring more than 25,000 employees in 2016. To briefly describe Hyundai’s culture by comparing it with Toyota’s, “If you ask the people at Toyota to make you a chair, they will first develop a plan . . . if you ask people at Hyundai to make you a chair, they will go and get some wood” (Shim & Steers, 2012, p. 581). Hereinafter, the authors use HMC interchangeably with Hyundai Mobis because Mobis, as an affiliate of HMC group, is widely considered to have an organizational culture identical to HMC’s and because most of its TMT members are still transferred from HMC TMT.

The subcontractor is a spare parts provider that paints and packs steel-made body panels for Hyundai Mobis. Prone to corrosion, the body panels must be painted through an electrodeposition coating (EDC) process and packed with bubble wrap in carton boxes before being shipped abroad. Since its establishment in 1992, the subcontractor has operated three domestic plants in South Korea and three overseas plants in the United States, China, and Slovakia. It generated US$87.2 million and employed more than 200 full-time workers worldwide in 2016.

Data Collection

The authors had the opportunity to observe the subcontractor for 12 months in 2017. To obtain the full benefits from utilizing the triangulation method, the authors conducted in-depth interviews, perused archival data (e.g., academic papers, newspaper articles), and observed several company-wide activities. First, the authors collected data from interviews accompanied by past managerial practices (Miles & Huberman, 1984). The authors conducted a series of semi-structured, face-to-face interviews with five respondents: the president (founder), the vice president (co-founder), the chief human resources officer (CHRO), the plant manager, and the chief HR manager. The authors asked two entrepreneurs (the president and the vice president) to describe what they remembered about the user company, the business environment, and important managerial decisions (e.g., either exploratory or exploitative innovations, such as large investment in new business/equipment and quality improvement) throughout the company’s history. The authors also asked them to explain why they made these decisions. Then, the authors asked the CHRO, the plant manager, and the chief HR manager to describe the managerial behaviors of the two entrepreneurs and the organizational climate when these decisions were made. When most of the earlier decisions were made, these three respondents were at an employee level, not at a manager level; thus, they could describe the real picture of organizational climate and entrepreneurial culture better than the two entrepreneurs, who may have painted a rosier picture. The authors audio-recorded all of the interviews and then transcribed them under the permission for future publication in an academic journal. They also wrote memos for ongoing on-site analysis during the interviews (Glaser & Strauss, 1967). The data that the authors gathered included more than 17.5 hr of interviews (16 interviews with an average of 1.1 hr in length each) and consisted of 107,000 words.

Second, the authors gathered the subcontractor’s archival data, documentaries, certificates of awards, and even photographs for two reasons: to confirm the respondents’ 25-year recall memory and to ask the respondents to describe company activities that the authors considered important but that they did not mention. In addition, the authors perused academic papers and online sources (e.g., company websites) about the user company (HMC and Hyundai Mobis) to define its TMT’s entrepreneurship and entrepreneurial culture. In particular, the second author has long been familiar with its entrepreneurial culture because he attended several training courses on Hyundai’s entrepreneurship when he worked for Hyundai Construction Company, which was founded by the same entrepreneur, Chung Ju-yung (also pronounced as Jung Joo-young), who later established HMC and Hyundai Mobis. The authors wrote field notes while accessing the data.

Finally, the authors observed several managerial activities, including a 1-day quality workshop and a 1-day company track meet (10-km marathon) to capture the invisible entrepreneurial culture and organizational climate of the subcontractor. The authors also attended three quarterly TMT meetings to observe employees’ attitudes and behaviors, as well as those of the two entrepreneurs. The authors wrote field notes while participating in these activities.

Data Analysis

The authors conducted data analysis both while gathering data (e.g., interviews, archival data, and observations) and after completing data collection because “the analysis of field data actually begins during a study’s observational phase” (Barley, 1990, p. 234). These are traditional qualitative methodologies (e.g., Eisenhardt, 1989; Miles & Huberman, 1984; Yin, 1994). The authors also adopted the advantages of several graphical methods, such as flow diagrams (Yin, 2011), concept maps (Maxwell, 2005), causal loop diagrams (Masuch, 1985; Sterman, 2001; Weick, 1979), conceptual frameworks (Miles & Huberman, 1984), and integrative diagrams (Strauss, 1987). These different graphical methods are slightly different from one another, but they all consist of concepts and relationships among concepts (Maxwell, 2005). The authors further utilized either positive or negative signs (+ or –) to clarify the relationships that could change when a particular event occurs.

Specifically, when conducting data analysis, the authors read the interview transcriptions and reviewed the memos and field notes that they wrote when collecting the data. Carefully perusing them to meet the objectives of this study, the authors categorized the data by drawing on the subdimensions of the original concepts of (the TMT’s) entrepreneurship, entrepreneurial culture, and (exploratory or exploitative) innovations. For example, considering the subcontractor’s decision-making style to be rapid, centralized strategic, and decentralized operational, the authors categorized it into one dimension of entrepreneurial culture by drawing on a prior study’s findings on HMC’s culture (e.g., Shim & Steers, 2012; Steers & Shim, 2013). Although this categorization is not perfectly mutually exclusive, it could be moderately reasonable in meeting the current study’s objectives: the first two (the TMT’s entrepreneurship and entrepreneurial culture) might be causes, while the last (innovations) might be effects. The authors also identified patterns or the relationships among them: the user company’s entrepreneurs cultivate its entrepreneurial culture and influence the subcontractor TMT’s entrepreneurship in turn; the subcontractor TMT’s entrepreneurship shapes entrepreneurial culture and prompts (exploratory) innovations; however, the level of market maturity changes the latter relationship. The authors finalized a flow diagram that showed the relationships among entities and developed a new theoretical framework that integrates the study findings. The authors collaboratively confirmed the concepts and relationships among concepts by iteratively perusing data and by repeatedly modifying flows (relationships). The authors depict the flow diagram in Figure 1 and recommend that readers read the following section by referring to it.

Figure 1.

Flow diagram of culture shaping through cultural isomorphism.

Findings

The User Company TMT’s Entrepreneurship and Entrepreneurial Culture

Chung Ju-yung, the founder of Hyundai Group (e.g., HMC, Hyundai Heavy Industries Co., Ltd., Hyundai Construction Company), is famous for his entrepreneurial leadership that (1) focuses on “creative problem solving and reasoned risk-taking,” (2) anticipates and responds to “environmental changes rapidly to capitalize on opportunities and manages problems,” and (3) develops “flexible operating policies” (Shim & Steers, 2012; Steers & Shim, 2013, p. 586). He led the Hyundai Group in boldly overcoming the hurdles posed by limited resources and severe competition. Myriad documents and studies tell the history of his legendary entrepreneurial activities, such as one episode of meeting production schedules by building dry docks and ships together (Hyundai Heavy Industries Co., Ltd.) and the other of saving overseas labor costs by moving prebuilt iron-made marine structures from Ulsan, South Korea, to Jubail, Saudi Arabia (Hyundai Construction Company).

In a comparative study of the organizational culture of Toyota and HMC, Shim and Steers (2012) argue that HMC is most effective in driving the organization and employees on edge under highly risky situations by establishing uncertainty and flexibility as norms. They list four factors of HMC’s organizational culture: “(1) risk orientation—accepting risk to turn a crisis into opportunistic creativity, (2) work commitment—a strong atmosphere of ‘must succeed’ created by a repeated chain (challenge > response imperative > task accomplishment > increased self-confidence), (3) in-group collectivism, and (4) decision-making—rapid results-oriented decision-making with both centralized strategic decisions and decentralized operational decisions” (Shim & Steers, 2012, p. 586).

The Influence of the User Company’s Founder on the Subcontractor’s Founder

The most important decision-making members of the subcontractor TMT are the president (founder) and the vice president (co-founder). The president was born and raised in Ulsan, South Korea, where its headquarters are now located. Ulsan, the city where Chung Ju-yung bore his initial ambition for business, houses many plants of HMC and Hyundai Heavy Industries Co., Ltd. From the late 1980s to the early 1990s, when the subcontractor was established, South Korea’s annual GDP dramatically recorded a high growth rate of nearly 10%. In particular, Ulsan was the most industrialized city in South Korea, and a large group of manufacturers and even landowners, who dreamed of being the next Chung Ju-yung, flowed into the city to become parts suppliers of Hyundai’s plants. Before the president started the subcontracting company, he ran a small painting business as an outsourced subcontractor at several plant construction sites. His existing business could be characterized by a business cycle that, once he completed painting at one construction site, he had to search for new business at another. Sometimes, when a painting worker sustained a severe injury at a construction site, he had to pay a penalty equal to a half-year of income, as well as lawyer fees to settle the lawsuit. This event stimulated the entrepreneurial learning process (Sullivan, 2000) and inspired him to start his business of operating plants. He described his memory as follows:

Ah! This [painting in a construction site] is a business that ends if an accident occurs. So I made up my mind to stop doing this business as soon as possible. I searched for a new business opportunity related to operating facilities. If I owned a plant and became a subcontractor of a big manufacturer, I would not need to search for the next business opportunity. In Ulsan, there were many Hyundai Group plants, and I decided to create my own business operating plants, like Chung Ju-yung, the founder of Hyundai, who developed and produced a car first made in Korea without any knowledge and past experience. Like him, I invested most of my money in a new business, taking high risks.

Historically, automakers had produced cars “within hierarchical, vertically integrated Fordist/Chandlerian firms,” but in the 1980s, they began to assemble cars with a cluster of “vertically disintegrated” parts suppliers (Herrigel & Zeitlin, 2010, p. 1086). In the early 1990s, stimulated by this structural change in the relationship between the user company and suppliers in the auto industry, HMC and Mobis decided to outsource production of spare parts to subcontractors. At the time, the existing painting shops produced spare parts with traditional painting methods (e.g., manual brushing, spraying, and dipping), not with the EDC method utilizing the automated painting production equipment, thus failing to meet the quality level expected by HMC and Mobis. In other words, the existing painting shops operated on the basis of traditional resources (e.g., physical, financial, and human resources); moreover, a new subcontractor operating the EDC process needed to have the brand-new knowledge and entrepreneurship that Peter Drucker additionally emphasized because none of the existing painting shops in Korea operated with the EDC process at the time.

The president of the subcontractor asked all around to find an engineer who could build, operate a new plant, and win orders from HMC and Mobis; after meeting several engineers, he recruited the right person for the job, who later became the vice president. They established the subcontractor in 1992, attempted to turn their company into a unique subcontractor supplying EDC-processed spare parts to HMC, and finally succeeded in winning orders. The president of the subcontractor had been neither an employee nor a family member of Hyundai. Nevertheless, as an admirer of Chung Ju-yung characterized by entrepreneurial leadership, such as risk taking and rapid response to environmental changes, the president decided to invest all of his money in building and operating a new EDC-processing plant, the first in Korea.

Cultural Isomorphism: The Subcontractor’s Entrepreneurial Culture Similar to That of the User Company

When the subcontractor began receiving orders from the user company, there were already several existing subcontractors who produced spare parts with the traditional painting method. To take contracts over from its competitors, the new subcontractor’s TMT decided to meet all of the user company’s needs (i.e., low price, high quality, and flexible production schedule) and even mimic all of the cultural aspects of the user company. For example, when other subcontractors (existing competitors) refused abrupt manufacturing orders from the user company, the new subcontractor accepted the orders and produced all of the auto parts by operating for 24 hr for several days. A key cultural factor of the user company was rapidness (even in uncertain situations); thus, the subcontractor won over the user company by perfectly mimicking the user company’s culture. The authors label this process between-organization cultural isomorphism, as a result of which the subcontractor’s cultural aspects are similar to those of the user company. In the following, the authors elucidate them with rich evidence, drawing on prior studies (e.g., Shim & Steers, 2012; Steers & Shim, 2013) that analyzed the user company’s cultural aspects, such as (1) rapidness, (2) uncertainty and flexibility as norms and work commitment, (3) risk orientation and centralized strategic, (4) decentralized operational decisions, and (5) in-group collectivism.

Culture Descriptions (1): Rapidness

The subcontractor’s culture is similar to that of the user company in that they both prioritize rapidness as the most important competence. In particularly, given the unexpected workloads (urgent orders) from the user company, the subcontractor’s employees worked overnight and even on holidays, taking for it granted. As one respondent describes it:

It is matter of time that the user company quits ordering to a certain subcontractor. If my company pays less attention to rapidness, another subcontractor will take my company’s place . . . My company’s secret to success is just working hard to quickly paint, pack, and deliver our products to the user company as soon as possible. I think the user company likes my company because the two are identical to each other in that sense.

Similarly, another respondent’s comment also supports how well the subcontractor sets rapidness as a top priority, which is one of the user company’s cultural factors, as follows:

A manager of the user company often said that my company has the ability to do everything very quickly and to usually meet deadlines, which corresponds to the organizational culture of his company.

Culture Descriptions (2): Uncertainty and Flexibility as Norms and Work Commitment

During the first decade of the 21st century, HMC abruptly gained popularity across the world and dramatically expanded its production quantity; thus, it had to establish overseas plants every 2 years. As the global demand for the cars that HMC produced was growing, the global demand for its spare parts was also increasing. Consequently, Mobis requested that the subcontractor build and operate overseas plants in the United States, Slovakia, and China to participate in its global supply chains. Like employees in the user company, those in the subcontractor, considering uncertainty and flexibility to be norms, had a high level of work commitment. A respondent who was a former plant manager at the time describes it in the following:

In 2007, there were serious problems at the newly built plants in the US and Slovakia at the same time, and we could not expect to meet the delivery schedule and quality standards. So the TMT decided that I should go as a plant manager to the US. I was fixing the problems with the new facilities and installing new equipment in the US plant. Then, a plant in Slovakia that had to start operating on November 1 had other serious problems. Since the plant in the US had more time than that in Slovakia, the TMT suddenly asked me to come to Slovakia. I went to Slovakia and finished the preparation for operating the Slovak factory . . . Later, something similar happened in China. I went to the plant construction site in China with the vice president. He looked around the site and told me to stay there a year, allowing me to bring all my family over immediately. I had two sons. The younger one was in the first grade, and the elder was in the third year of high school. I brought my kids to China and let them quit school for a year because my company’s business is a top priority, not only for me but also for my family. If my company no longer earns money, my family and I cannot live.

Culture Descriptions (3): Risk Orientation and Centralized Strategic Decisions

According to Shim and Steers’ (2012, p. 586) study, “managers [in the user company] encouraged to accept risk and uncertainty as a vehicle for opportunistic innovation.” Similarly, whenever the subcontractor encountered a risky situation, its TMT often made centralized strategic decisions and exploited the situation by taking risks. One respondent described risk orientation and centralized strategic decisions as a cultural dimension as follows:

Hyundai Mobis confidentially planned to replace a large number of existing orders given to my company by building its own new plant and by producing by itself. One day, suddenly, my vice president and I heard that news, and we contacted Mobis. It asked us to estimate how much it would cost to build a plant. My vice president let me make a proposal at thirty percent below Mobis’ cost estimation. When we proposed our estimation, Mobis cancelled its original plan to build its own plant and produce by itself, accepting our proposal that we, not Mobis, build and operate a plant. Although we paid a lot of money to build an extra plant, by taking risks, we were able to avoid the threat of losing existing orders and gained an opportunity to generate more revenue.

Culture Descriptions (4): Decentralized Operational Decisions

Once the user company TMT set its strategic directions and goals, its employees would often be encouraged to find ways to overcome “local challenges and environment” (Shim & Steers, 2012, p. 589). This cultural aspect of decentralized operational decisions is attributed to the so-called “can-do spirit” of its founder, Chung Ju-yung: when he was told that his employee could not complete something, he asked, “Hey, have you ever tried it?”; he often attempted to inspire his employees to develop a strong belief in the can-do spirit and said that a person with a can-do spirit can always find a solution that he or she has not yet found (Korea Herald, 2015). In a similar vein, the subcontractor TMT usually emphasized the can-do spirit so that its employees could make decentralized operational decisions by themselves in urgent situations. A respondent stated this point as follows:

In 2003, when I was not at the manager level but an employee, a devastating typhoon caused great damage. One side of the roof was blown away by strong wind. The roof was just above the space where [inventory] items already produced were waiting for delivery and shipment. I alone decided to try to cover the open roof with a large vinyl tent. It was fifteen meters high. I didn’t have any safety strap. It was very slippery because it was raining . . . There was no other person to climb up there, but I went up because I was an employee with a duty to protect the properties of my company.

Culture Descriptions (5): In-Group Collectivism

Southerton (2014, p. 47) considered one of HMC’s cultural factors to be harmony, which is described as “strong collaboration and cooperation with family-like solidarity.” Similarly, Shim and Steers (2012, p. 587) noted that the user company’s culture shows “stronger commitment to the organization itself, defined in terms of loyalty, pride, and team cohesiveness.” The authors found a similar cultural aspect, so-called in-group collectivism, in the subcontractor when an interviewee described the following:

In 1997, a financial crisis struck East and South Asian countries. Automakers ceased to produce their cars, and their contractors did not receive sufficient orders from them. However, the TMT neither closed the plants nor laid off any employees. Instead, the TMT decided to overcome the crisis together. To maintain employees’ psychological readiness to produce on time, the TMT let all the workers and managers register for a marathon race that would soon be held in the city where the plant was located. Every evening, we ran at a nearby playground to train ourselves for the race. After running, we sat on half-cut empty paint drums and held small barbecue parties with sliced pork and Soju [which is a popular, inexpensive Korean vodka] to pray that we would all survive these hard times.

The Relationship among the User Company TMT’s Entrepreneurship, the Subcontractor TMT’s Entrepreneurship, and Exploratory Innovations

In this case, the authors elucidate that the entrepreneurship learned by the subcontractor TMT from the user company led to exploratory innovations. For the timely construction of the overseas plants, the subcontractor TMT ordered its employees to design easy-to-assembly (modularized) facilities. With this method of shipping prebuilt modules to the overseas plants, the subcontractor could save the additional time and costs that might have been incurred by the poor management of a local constructor. The subcontractor TMT generated this modular idea by drawing on the Hyundai Construction Company’s innovative construction case at Industrial Port Jubail, Saudi Arabia, in 1976, where a marine structure that was 375 m long and weighed 40,000 tons was prebuilt in South Korea and transported to the gulf by barges: it was an original idea of Chung Ju-yung, the founder of Hyundai.

The Relationship Between the Subcontractor’s Entrepreneurial Culture and Exploratory Innovations

The subcontractor’s entrepreneurial culture consequently stimulated exploratory innovations. A respondent recalled his experience in designing a new IT project, such as enterprise resource planning (ERP) and supervising QS 9000, Korea’s quality standard for manufacturing, modified based on ISO 9000, as follows:

My company did not have sufficient number of engineers, so I had to do it myself with a high commitment even though I didn’t know how to. When my company had to design and implement a new IT system, I formalized our business processes in line with best practices and reflected them in the IT system. I had to convince the programmers to implement customized processes. I then did a lot of work spending several nights in redrawing our work processes with the programmers . . . When my company decided to apply for the quality certification called QS 9000, many employees participated in off-site trainings without any hesitation because all employees, believing in their TMT’s decision, thought that the importance of quality would soon be highlighted by the user company. Finally, we became the first QS 9000 holder among subcontractors of the user company.

The Relationship Among the User Company TMT’s Entrepreneurship, the Subcontractor TMT’s Entrepreneurship, and Exploratory Innovations

The user company’s entrepreneurship positively influenced the subcontractor TMT’s entrepreneurship, entrepreneurial culture, and exploratory innovations. There was an example in which the user company gave the subcontractor an urgent request. The subcontractor TMT, by recalling an episode in which the user company’s founder searched for a novel solution during the Korean War, attempted to find an innovative way to attain the best outcomes. A TMT member described it:

When a new plant in China was in the planning phase, HMC abruptly requested that my company invite a group of Chinese executives from HMC Beijing to our headquarters in Ulsan, South Korea. The visiting group included a man who ranked as high as HMC’s executives. We remembered an episode about Chung Ju-yung: when UN officers were planning to visit the UN military cemetery during the Korean War, they might have been disappointed because there was no grass in late winter. To delight the UN officers, Chung Ju-yung planted barley because barley has green leaves even in late winter and looks like grass at a glance. We suddenly contacted the police station near our headquarters to ask police motorbikes to escort the Chinese visitors on the road while monitoring their movement on the radio. We also quickly made placards that covered the whole outside wall of the office building and hung side by side, which were printed with “We welcome you enthusiastically” in Chinese on a red background and with golden lettering. We already knew the Chinese really like red and golden colors. The Chinese visitors were very delighted, and later my company’s business had no problems in China.

The Effects of Market Maturity on the Relationships Among the Subcontractor TMT’s Entrepreneurship, Entrepreneurial Culture, and Exploratory Innovations

All relationships among entities noted above could be considered positive. However, market maturity may negatively influence the relationship between entrepreneurial culture and exploratory innovations, whereas it may still positively impact the relationship between the TMT’s entrepreneurship and innovations. Specifically, Figure 2 shows annual domestic revenue from 1992 to 2015. Since 1992, when the first plant was built, three factories were built over the next 7 years; thus, it took approximately 2 years to build another plant. The subcontractor’s business grows in a step-wise fashion because each new factory increases its revenue. The revenue ceiling can be determined by the user company’s demand, and thus, the subcontractor inevitably reaches a growth limit. In 2004, diminishing revenue growth was prominent, and the market matured.

Figure 2.

Subcontractor’s revenue growth.

When the dramatic growth in revenue was attenuated in 2004, the TMT of the subcontractor sought exploratory innovations through investment in an IT startup, by following the social climate that caused the internet bubble in South Korea. The TMT of the subcontractor decided to contact a group of engineers and start a venture with them because its members (president and vice president) still had strong entrepreneurship. The venture developed sensor chips that would be used for commercial electronics such as mobile phones and small digital gadgets. The president of the subcontractor directed company-wide attention to this venture and tried to build a similar cultural atmosphere to that of the mother company, the subcontractor. For example, he invited the venture employees to the subcontractor’s corporate events, including an overseas family trip and an annual New Year’s Eve party. A number of engineers had already obtained high academic achievement in the related fields and had a high level of competency in gaining financial support from the central government’s R&D fund. However, they failed to meet development deadlines, and the president of the subcontractor doubted their abilities. In 2010, the venture was finally broken up, leaving neither tangible nor intangible assets (e.g., equipment, engineers). An employee lamented, “Generally speaking, when a company closes, some skilled persons or facilities would remain. However, the company [venture] left not even a handful of ash.”

In 2010, upon closing the venture, the subcontractor again bought out a linen-washing company whose main clients were large-scale hotels in a nearby tourism complex. The subcontractor TMT found that the EDC and the linen industry were similar to each other in terms of their business processes and resources (e.g., continuous production system, water and sewage treatment system). The TMT observed the trend that people are increasingly spending more of their disposable income on traveling and less on durable goods such as automobiles. However, many employees had a negative view of the TMT’s decisions, and one respondent remembered the failure of the sensor company and commented on the new business:

There was a negative climate against new business among employees. It was an electronic industry very different from the current [EDC] industry. In the electronics industry, the consumable cycle is very short, whereas the development cycle is very long. While competitors were producing high-quality sensors at low prices, we were still developing basic technologies . . . Now, the TMT decided to enter the laundry business because it seemed to be similar to our current business model and process. So we needed to watch what’s going on because we still thought our competency fit with our user company’s demand and worked well in this industry. None of us liked to participate in the new business.

Discussion

In the present research, the authors attempted to elucidate how cultural isomorphism emerges across organizations and how culture, in turn, is shaped within a new organization. Specifically, these findings suggest that, when a new subcontractor’s survival depends solely on the user company’s decisions to purchase its products, its TMT usually deploys good impression management by harmonizing with the user company’s social codes or by following the user company’s culture (Weber & Dacin, 2011). In the case, the subcontractor faces external cultural constraints. In other words, when the relationship with the user company occupies the most central place for the subcontractor, culture may act as a constraint (Weber & Dacin, 2011).

One aspect of the current case—external cultural constraints—highlights the contractor’s cultural isomorphism in relation to its user company’s culture. The authors define it as a cultural process or structure developed by a following new organization (subcontractor) that attempts to render its culture similar to a leading organization’s (user company) culture to obtain legitimacy in the same organizational field. Interestingly, the notion of cultural isomorphism is closely related to the term institutional isomorphism, which was introduced by institutionalists (e.g., Meyer & Rowan, 1977) and refers to “constraining process that forces one unit in a population to resemble other units that face the same set of environmental conditions” (DiMaggio & Powell, 1983, p. 150). To survive, the subcontractor, whose products are all purchased by the user company, cannot help but accept the user company’s cultural code. Moreover, the concept of cultural isomorphism is associated with the proponents of population ecologists (e.g., Hannan & Freeman, 1977) in that “the environment [user company in the organizational field] selects in only those organizations whose characteristics match the environment” (Nelson & Gopalan, 2003, p. 1118).

Another aspect of this case—internal cultural resources—indicates the contractor’s culture shaping within its organization. The subcontractor TMT’s entrepreneurial identity is influenced by the user company TMT’s (Werthes et al., 2018), but the subcontractor, as a startup company, had to develop its own culture within its organization (Choueke & Armstrong, 2000). Drawing on observations and archival data, the authors posit that the subcontractor TMT used culture as a resource for action by storytelling (e.g., company history), showing rituals (e.g., repeating a company slogan), and attaching material symbols (e.g., company logo) on employees’ workwear. Thus, the subcontractor TMT can be viewed as cultural entrepreneurs (Lounsbury & Glynn, 2001) because it often used pragmatic problem solving and even bricolage, which is an action to “combine diverse materials for their own pragmatic ends” (Weber & Dacin, 2011, p. 3).

By emphasizing the subcontractor TMT’s cultural isomorphism and culture shaping, the authors label its overall cultural role as a cultural game player. In social psychology, the view of a cultural game player emphasizes that an individual actively judges and chooses appropriate behaviors, not only by predicting anticipated responses from others but also by comparing his or her own benefits to the costs (Kim et al., 2016). In the present example, while the subcontractor TMT attempted to harmonize with the user company’s cultural code to ensure future survival in its organizational field, it also tried to actively use its cultural resources to form a strong entrepreneurial culture within its organization.

More conspicuously, market maturity influenced the relationship between entrepreneurial culture and exploratory innovations. Specifically, regardless of market maturity (both in the short and long runs), the subcontractor TMT always sought exploratory innovations because its members were entrepreneurs. Nevertheless, the entrepreneurial culture effectively stimulated exploratory innovations (Jackson, 2015) only while the market was growing (in the short run); when the market matured or was declining (in the long run), the culture exacerbated employees’ positive attitudes and behaviors toward exploratory innovations. The authors elucidated this phenomenon with an inverse U-shaped graph, as depicted in Figure 3.

Figure 3.

Changes in exploratory innovations as the market grows.

This phenomenon can occur for the following reason. The subcontractor’s entrepreneurial culture was transplanted by its TMT, usually through mimetic or normative and sometimes through coercive culture isomorphism (DiMaggio & Powell, 1983). When the market grew, most employees perceived the effectiveness of the entrepreneurial culture (shaped through cultural isomorphism) toward exploratory innovations because they believed that the more exploratory innovations that they sought and implemented, the more revenue from the user company that they could generate (effectiveness of mimetic or normative isomorphic process). However, when the market matured, they no longer believed in the effectiveness of entrepreneurial culture because they did not expect to generate much revenue from the user company (ineffectiveness of coercive isomorphic process).

Theoretical Contributions

The present study makes three theoretical contributions. First, the authors extended the practically applicable realm of the existing conceptual framework, which has distinctively divided organizational culture into four domains (internal constraints/resources and external constraints/resources). In particular, answering Überbacher’s (2014) call to build a bridge between audience-centered (constraints) and actor-centered (resources) views, the authors found that cultural entrepreneurs, as cultural game players, could positively respond to both external constraints and internal resources.

Second, this research revealed the phenomenon of cultural isomorphism across organizations. Although a handful of studies have been conducted with regard to cultural isomorphism, they have merely emphasized an isomorphic relationship between national and organizational culture (e.g., Nelson & Gopalan, 2003), not between two organizations. However, the present study is the first to reveal cultural isomorphism, which occurs across organizations, in a mandatory setting for a startup subcontractor following its user company.

Finally, to the authors’ knowledge, this study is the first to theorize the critical effect of market maturity on the relationship between entrepreneurial culture and exploratory innovations. Specifically, as the market grows, the entrepreneurial culture (shaped through cultural isomorphism) can boost exploratory innovations; however, once the market matures, the culture cannot prompt explorations. This finding suggests that market maturity plays a critical role in changing the effectiveness of entrepreneurial culture, which is particularly shaped by cultural isomorphism.

Practical Implications

This study’s findings provide several managerial implications for practitioners. A startup TMT should become a cultural game player. A startup company usually strives for the legitimacy of existing clients or user companies. Its TMT’s attempts to learn and resemble the user company’s culture could be perceived favorably by the user company, and if its efforts are successful, it can vend more products to the user company. Therefore, when a startup has only one user company, its TMT should adopt the positive aspects of the user company’s culture through cultural isomorphism.

In addition, a startup TMT should carefully use the entrepreneurial cultural toolkits that are shaped through cultural isomorphism. Its culture can positively stimulate employees’ willingness to search for and implement exploratory innovations when the market grows, but its culture attenuates while the market matures. Thus, a startup TMT should remember that its employees’ shared meaning of entrepreneurship—within-organization shaped entrepreneurial culture through between-organization cultural isomorphism—can be influenced by the maturity level of the market.

Limitations and Future Research Directions

Despite its several theoretical contributions and practical implications, the current study has some limitations. The authors did not consider the effect of national culture. A prior study conducted by Nelson and Gopalan (2003) presented two possibilities, that is, that organizational culture can have an isomorphic structure and process with regard to national culture and vice versa. The authors cautiously presume that cultural isomorphism can exist only in countries with a national culture characterized by a high level of power distance and collectivism (e.g., South Korea; Hofstede, 1980), where coercive and normative pressure usually prevails. Future research should replicate these findings in Western settings for greater generalizability.

Although many studies of entrepreneurship have emphasized the role of personal characteristics and environment (e.g., dispositions, social provision of entrepreneurship education; Chung & Lee, 2017; Farashah, 2015; Khalili et al., 2015; Lumpkin & Dess, 1996; Shinnar et al., 2012), the present study did not consider TMT members’ dispositional and other environmental effects on their entrepreneurship. Future studies should examine the effects of personal disposition and various environmental factors on cultural entrepreneurship in the same settings.

Footnotes

Acknowledgements

The authors would like to thank Jungsik Kim, professor at Kwangwoon University, for his advice.

Declaration of Conflicting Interests

The author(s) declared no potential conflicts of interest with respect to the research, authorship, and/or publication of this article.

Funding

The author(s) disclosed receipt of the following financial support for the research, authorship, and/or publication of this article: This work was supported by the National Research Foundation of Korea (NRF) grant funded by the Korea government (MSIT) (No. 2019R1G1A1099483).

ORCID iD

Goo Hyeok Chung

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