We build on ecological logic that species, with their functionalities, fit in appropriate environments or niches. Some niches are more favorable than others, resulting in better performance when the environment fits to the species. The environment in an ecosystem is characterized by three elements: temporal variation (unpredictability), climatic conditions (tolerance) and spatial heterogeneity (complexity) (Begon et al., 1996). The same elements can be found in management literature: temporal variation is found as dynamism (unpredictability), climatic condition as hostility (tolerance), and spatial heterogeneity as complexity (heterogeneity) (Dess & Beard, 1984; Luo & Peng, 1999). The measure of dynamism as formulated by Luo and Peng (1999), forms the market characteristic in the present study.

A common model to conceptualize individual roles and competences in organizations, as well as for the community, is the competing values framework (Cameron & Quinn, 2011; Quinn, Faerman, Thompson, & McGrath, 1990; Quinn & Rohrbaugh, 1983). The competing values framework is a meta-model representing the main ideas, which have emerged over time and is often tested and applied (Kalliath, Bluedorn, & Gillespie, 1999; König, Diehl, Tscherning, & Helming, 2013; Patterson et al., 2005). It distinguishes between the dimensions of flexibility (oriented at decentralization and differentiation) versus control (oriented at centralization and integration), and internal (oriented to maintaining the system) versus external (orientated to competitive position of the system). These two axes result in four quadrants, containing competing values, and respective roles (Quinn et al., 1990):

• the Open System model values change and expansion, with innovator and broker roles, and competences like creative thinking, negotiating, present ideas;

• the Internal Process model values continuity and consolidation, with monitor and coordinator roles, and competences like project and cross functional management, information handling, measure and analyze, quality and performance;

• the Rational Goal model values maximization of output, with producer and director roles, and competences like productive work, create vision, set goals, and planning;

• the Human Relations model values development of human resources, with mentor and facilitator roles, and competences like team building and conflict management.

On the organization level the employee community is characterized by the role-mix (Cameron & Quinn, 2011).

We define organizational capability as the company’s ability to perform a productive task (Grant, 1996). Following Grant, integration of knowledge is the essence of an organizational capability, related to the firm’s capacity to create value, based on the integration of knowledge of a number of individuals. To cope with increasing complex issues from a fast evolving environment, new knowledge is also proposed (Nonaka & Von Krogh, 2009), which we operationalize as innovativeness.

Performance is measured by the perceived profit. Although the effects of the actvities of a company are felt much broader than only in financial results or products (Brundtland, 1987; Global Reporting Initiative, 2011; Parnell, 2008), we focused on profit.

The relations between the above mentioned variables are pictured in the research model in Figure 3.1.1. The direct relations to performance are presented as solid lines. The dotted lines represent fit as moderated by market dynamism to test the change in the direct relations between role-mix and performance, and between capabilities and performance under the influence of market dynamism. The numbers refer to the propositions in paragraph 3.2.

Figure 3.1.1
RESEARCH MODEL: DOTTED LINE IS MODERATION TO TEST FIT

The propositions in this article have to be seen as expectations, because of the explorative character of the research. Propositions 1 and 2 deal with the strategic fit between employees and market dynamism: the moderation of the role-mix by market dynamism. Proposition 3 deals with the indifferent relationship of knowledge related firm capabilities and market dynamism.

The first proposition investigates the relative change in roles on the open system - internal control axis. According to Quinn (1990), every role will contribute and all types are needed in an organization, but the role-mix may change depending on external and internal factors. The neo-classical outside-in approach prevents unpredictability, and therefore having more control, by a strategy process of combating industry forces (Porter, 2008). Also, as a part of the strategy process, management often brings in more open system roles when dynamism increases. However, this is not a direct relationship between market dynamism and role-mix, but the effect of a deliberate strategy process, following the counter clockwise direction in Figure 2.1.

Otherwise, according to the RBV, the need for innovative and flexible organizational capabilities will be higher in a highly dynamic environment (Gunderson & Holling, 2002; Ketkar & Sett, 2010; Lawrence & Lorsch, 1967; Mintzberg et al., 1998; Volberda, 1992). Organizations directed to innovation, new products and services, emerging markets, and co-creation embrace more exploratory behaviors (March, 1991), probably neglecting exploitative processes, like refinement and replication, needed for incremental innovation in more stable circumstances of growth and maturation (Benner & Tushman, 2003; Hannah & Lester, 2009; Williams, 1998). Research on strategic leadership shows that different leadership behaviors are necessary to support exploration or exploitation (Jansen, Vera, & Crossan, 2009; Lawrence, Lenk, & Quinn, 2009): transformational leadership (Bass, 1985) stimulates innovation and creativity and transactional leadership fosters reward for the planned effort and management by exception to take remedial actions when needed (Avolio, Bass, & Jung, 1999). Both, neoclassical approach and RBV, suggest an increase in open system roles when market dynamism augments.

However, in an ecosystem, the abundance, performance and interaction of a group of individuals are at stake, which entails other reasoning. Flexible types (open system roles) have a wider tolerance range against irregular disturbances and can exist in more niches (Mackenzie, Ball, & Virdee, 1998); those will not directly decrease when dynamism increases. It is just that the inflexible types only exist in places within their limited range of tolerance. Likewise, too much attention to the internal planning process, policy and procedures, or control and process analysis will lead organizations astray from market activities (Mintzberg, 1983). Following an ecologic model we deduct that when market dynamism increases, the performance of flexible open system types will stay the same, but in the role-mix the internal process roles will ebb.

Hypothesis 1: When market dynamism increases, there will be a better performance when in the role-mix the internal process roles decrease and the proportion of open system roles remains constant.

The second proposition investigates the relative change in roles on the axis rational goal - human relations. Result orientation can be useful in both exploration as well as in exploitation, provided that it is an external orientation (Jansen et al., 2009). A dynamic environment stresses the need for cost-efficiency and higher productivity (Volberda, 1992). When competition increases and markets become more demanding, rational goal competences will help to occupy niches quick and with enough mass (Quinn et al., 1990). This corresponds to what happens in pioneer (dynamic) ecosystems: occupying niches quick and with much mass. Besides these rational goal roles, researchers also indicate a better performance and a high performing organization when there is more attention to the human factor in organizations, human relations and empowerment (Gratton, 2000; Pfeffer, 1998; Verkerk, 2004), combined with values like social justice (Castells, 2002), or sustainability (Crielaard, 2008). Strategic HRM supports both performance management and the social context (Raisch & Birkinshaw, 2008), in order to enhance organizational flexibility and resilience in fast changing conditions (Cooper, Liu, & Tarba, 2014; Ketkar & Sett, 2010; Lengnick-Hall, Beck, & Lengnick-Hall, 2011). However, in an ecosystem, the relation roles are the structure of the system itself; the interplay between organisms and environment supports the resilience of the system. In an unpredictable environment, ecosystems are resilient and will persist when there is a simple structure (low spatial heterogeneity), dynamical robustness (high flexibility) and strong or direct connections with the environment and perturbations (Mackenzie et al., 1998). Therefore, we deduct that the change in the proportion of human relation roles when market dynamism increases will be a derivative of open system roles and rational goal roles. It can be expected that when market dynamism increases the rational goal roles, which enhance productivity, will augment. Also, it can be expected that human relation roles, which support flexibility, productivity and resilience dependent on the environment, will augment with increasing market dynamism, albeit a derivative.

Hypothesis 2: When market dynamism increases, there will be a better performance when in the role-mix the rational goal roles and the human relation roles.

The third proposition is about knowledge related firm capabilities. Neo-classical strategists put forward that organizations have to respond to the market. Organizations have to adapt their capabilities to the dynamics of the market by a deliberate strategy process. From this point of view the relationship between capabilities and performance will be moderated by market dynamism.

On the contrary, if firm capabilities are the starting point for strategy, market dynamism will have no influence on capabilities. Organizations mute the influence of the market and exclude the dynamism of the market, according to the law of requisite variety (Ashby, 1956). There is a certain resistance and resilience (Holling, 1973) of the system towards disturbances, for instance, built by the collective capabilities which can absorb, process and repair the effects of disturbances and maintain the system (Gunderson & Holling, 2002). Furthermore, companies construct resource-product matrices, based on capabilities and, in doing so, they shape the market (Wernerfelt, 1984). Hypothesis 3 follows this capabilities point of view.

Hypothesis 3: Market dynamism will have no influence on the relationship between knowledge related firm capabilities and performance.

The unit of analysis is the individual within an independent operating unit, thus an SME or an autonomous subsidiary belonging to a bigger organization. The empirical research was conducted in Netherlands at 48 business organizations, with 221 respondents, in a variety of branches with varying levels of dynamism to observe a wide range of environments and organizations (Jansen et al., 2009). Non-response bias was prevented by a convenience sample with sufficient variation. To deal with inter-observer reliability and potential common method bias, the questionnaires were separated and collected from multiple respondents per organization by independent persons. Based on research requirements (Field, 2009), the number of respondents per organization ranged from 3 to 6 with an arithmetic mean of 4.6 per organization, so organizations weighed the same in the dataset. Labor intensive attendance of students resulted in a response rate of 95%. To assure confidentiality, names of respondents and organizations were not revealed. In return, every organization received a full report of their scores in relation to the mean scores with comments and dedicated advice about possible management measures.

The research uses a cross-sectional design. In order to test the model empirically, the factors derived from literature were operationalized in a survey questionnaire and pretested separately, using existing scales from respective research. Because hard data in SME’s are not always available, we used the respondents’ perception in a seven-point Likert scale from 1-7. Factor analysis confirmed the constructs. In our dataset the reliability of the Quinn roles has a Cronbach α between.76 and.91. For market dynamism the items from Luo and Peng (1999) were refined according to the factor analyses (Cronbach α.69). The dependent variable performance was measured as perceived profit performance (Cronbach α.79). The construct for capabilities consists of perceived results on knowledge and innovativeness (Cronbach α.74). The research variables, definitions and measurement, means, standard deviations and Cronbach α are specified in Appendix 1.

Appendix I
RESEARCH VARIABLES: DEFINITION, MEAN, STANDARD DEVIATION, CRONBACH α AND QUESTIONS

Appendix I(Cont.)
RESEARCH VARIABLES: DEFINITION, MEAN, STANDARD DEVIATION, CRONBACH α AND QUESTIONS

We controlled for categorical influences by taking the company on a higher hierarchical level in a mixed model analysis. The covariance structure is not clear beforehand, so we took consecutive steps to build up models in order to compare the explaining power of the models (Field, 2009). The explaining power was tested by a Chi-square statistic and represented by the -2 Log Likelihood (-2LL). Firstly, we added random intercepts to the model and, secondly, we added random slopes in the mixed model regression analyses. Covariance mainly occurred concerning the intercepts, not in relation to the estimates. In other words, the company as a variable causes a significant variability in the constant (the intercept) factor, but no significant variability in the estimate (the slope).

Capabilities and competences are not analyzed together, because of mutual dependency. To test fit, we introduced interaction terms in a second step. In line with Venkatraman (1989), we took moderation as the interaction effect, because the research model has a clearly set out number of variables and specific selection criteria.

Table 5.1.1 shows the influence of dynamism and roles on the dependent variable performance, controlled for company influence by a mixed model analysis (Field, 2009). The company influence is shown to be important, which is reflected in the significance of the intercept in Table 5.1.1. Both, factoring in a mixed model structure (the intercept), and bringing in the interaction (model 2), are a major significant improvement of the model2.

Table 5.1.1
ESTIMATES OF FIXED EFFECTS BY DYNAMISM AND ROLES

Table 5.1.1(Cont.)
ESTIMATES OF FIXED EFFECTS BY DYNAMISM AND ROLES

The influence of the Internal Process role (0,23; p < 0,10) on the change-consolidation axis is significant and the Open System role (0,20; p = 0,11) is a best linear unbiased estimate. When dynamism increases, the estimate of the product score with the Open System roles is not significant (-0,08; p = 0,33); the product score of the Internal Process role shows a significant negative value (-0,18; p < 0,05), which indicates a substantial inhibition of the contribution.

On the task - human relations axis, dynamism enhances the contribution of Rational Goal roles significantly (product score 0,15; p < 0,1) and shows a best linear unbiased estimate for Human Relations roles (product score 0,11; p = 0,13). Concerning performance, hypothesis 1 (a decrease of internal process roles and no change in open system roles when market dynamism increases) and hypothesis 2 (increase of rational goal roles and human relations roles when market dynamism increases) are supported.

Beside profit as performance variable we also took a quick view at People and Planet as performance variables. The performance variable People (societal) shows the same tendency as Profit, with some interesting differences. Here the intercept is not significant (0,67; p = 0,30), and concerning the interaction effect of market dynamism on the role-mix, only the product score of Dynamism with Rational Goal shows a best linear unbiased estimation and might be economically relevant (product score 0,13; p = 0,11). Concerning the performance-variable Planet, only the intercept is significant.

Model 3 in Table 5.2.1 shows a large significant direct effect of knowledge related firm capabilities on performance (0,48, p < 0.001). As predicted by Hypothesis 3 dynamism does not moderate the contribution of capabilities (Model 4, product score -0,03; p = 0,69)3. A closer look at the different performance measures results in the same conclusions for Profit, People and Planet. For the three output criteria, Hypothesis 3 is supported.

Table 5.2.1
ESTIMATES OF FIXED EFFECTS BY DYNAMISM AND CAPABILITIES

The performance variable People (societal) may indicate another latent effect. For this performance criterion the intercept is not significant and there is an indication of a moderating effect by dynamism (product score = -0,077; p = 0,16).

Figure 5.2.1 summarizes the findings: there is moderation by market dynamism of the relationship between role-mix and the performance criterion Profit. Furthermore, this research found no moderation by market dynamism of the relationship between knowledge related firm capabilities and performance.

Figure 5.2.1
SUMMARY OF RESULTS

In order to open up the black box of the company, the focus of this study was the relationship between external market dynamism and the internal role-mix, and firm capabilities by the moderated effects on performance. The research question was: will companies perform better, when there is a fit between the environment and the employee role-mix, and are firm capabilities indifferent to the environment? To answer this question, we measured the effects of the role-mix and knowledge related firm capabilities moderated by market dynamism. Using a multi-level analysis, we controlled for company influences.

Concerning the Internal Process versus Open System orientation, management literature puts forward that dynamic situations require flexible behaviors (Jansen et al., 2009; Ketkar & Sett, 2010; Mintzberg et al., 1998; Quinn et al., 1990). Ecologic literature puts more attention to the limited tolerance range of inflexible types and the wide tolerance range of roles with flexible behaviors (Mackenzie et al., 1998). The results of the present study (Table 5.1.1) are in line with this ecologic literature, showing that, when dynamism increases, the contribution of the Internal Process roles (consolidation and coordination behavior) is restricted. The contribution of the Open System roles (flexible behavior) stays the same; Open System roles contribute in both low and high dynamic situations.

A positive influence of market dynamism on the axis of Human Relations - Rational Goal is shown in Table 5.1.1. Without the influence of market dynamism, Rational Goal and Human Relations are not significant. This is not in line with Quinn’s (1990) statement that all roles are needed. However, moderated by dynamism, both roles augment their contribution: Rational Goal (.15, p <.1) and Human Relations (.11, p = 0,13). Probably, in stable conditions, these roles are thought to be normal, but when dynamism augments, the contribution of Rational Goal roles improves significantly, and, albeit a best linear unbiased estimate, the Human Relations roles become more important as well (Gratton, 2000).

These conclusions might help to bear our expectations. In fact, in times when dynamism increases, Internal Process roles will step on the brake too much, while in easier times they can help fine-tuning for results (Jansen et al., 2009). However, management practice often does not act according to this logic: when dynamism increases, the management reflex often is a bigger need for control, which following the present study is counterproductive. Also noteworthy is the constant contribution of Open System roles. One might say that Open System roles will have the same impact in situations with high dynamism as in situations when dynamism is low. Interestingly, this is contradictory to common wisdom that more innovation is needed in dynamic times. In fact, it seems constantly needed. Innovative and flexible organizations are not the effect of more Open System roles, but of less control.

Concerning Rational Goal roles, the related competences become more important in dynamic times, to occupy niches quick and with enough mass (Quinn et al., 1990), like in pioneer ecosystems (Begon et al., 1996). Our results also show a latent effect that human relations roles become more important in dynamic contexts, to enhance organizational flexibility and resilience (Cooper et al., 2014; Ketkar & Sett, 2010; Lengnick-Hall et al., 2011). The main goal of HRM in dynamic contexts might be to reinforce the organizational system. The weaker moderation effect is probably because it is a derivative, or is this role too internal oriented staying in a non-fit state? Further research is required to answer this question. Management literature often focuses on organizational capabilities and leadership behaviors, and pays less attention the role-mix and employeeship. The present study shows, that for the role-mix, the combination of less control, more goal orientation, and constant innovation and attention to human relations could be the better mix for strategic fit in dynamic situations.

We focused our research on profit as outcome variable, but we also took the variables people (societal) and planet as outcome into account. The results are less clear, maybe because of the inter observer variability. However, the same tendencies as with profit can be seen for People (societal) as performance indicator. The difference is that the intercept has a non-significant, but high estimate. Societal goals and results seem to be perceived as important, but the impact is company specific. This might be interesting for further research. Concerning Planet as performance indicator, no relationship could be found. Is environmental performance really as important as managers want us to believe, or is Planet still lagging in the company practice or in the respondents’ perception? Or do these performance indicators require different business models and leadership styles, compared to profit maximizing models? These require additional research where values, business models and leadership models are incorporated.

How does this paper contribute to the debate between positioning school and RBV? Authors call for models dealing simultaneously with market and resources (Armstrong & Shimizu, 2007; Hamel, 2009; Priem & Butler, 2001b). The Ecologic System Model (Section 2, Figure 2.1) is such a model, showing three alternative starting points for the strategy process: counter clockwise the outside-in process starting at market dynamism, clockwise the inside-out process starting with employee roles and capabilities as resources, and clockwise an adaptive process starting at the connection between market dynamism and employee roles. The present study shows that the second alternative, the inside-out process with knowledge related firm capabilities as the explaining factor, is substantial and highly significant (Table 5.2.1): the system is resilient enough to cope with market dynamism, while the proportion of the individual roles in the role-mix adapt.

However, the positioning school strategists might say that the performance-market relation is an indirect relation via the process of strategy formulation. For example, it is claimed that strategic performance measurement systems contribute to strategy formulation and help to surpass the strategy-to-performance gap (Gimbert, Bisbe, & Mendoza, 2010; Koufteros, Verghese, & Lucianetti, 2014). However, this is not the case when environmental dynamism is high (Bisbe & Malagueño, 2012). The present study indicates that the resource-based approach complemented with an employee-market connection is suited when dynamism is increasing.

Only for societal performance the moderating influence on capabilities seems present, with a substantial negative best linear unbiased estimate (-0,8 p = 0,16). This probably means that for societal goals, market dynamism is a hindrance. When market dynamism increases, societal goals get a lower priority.

* Correspondence concerning this article should be addressed to Emiel F. M. Wubben, Hollandseweg 1, 6706KN, Wageningen, Guéldria, The Netherlands. E-mail: emiel.wubben@wur.nl