R. Andrews, M. Johansen
Introduction
The relationship between organizational environments and performance is a key
topic in organizational studies (e.g. Aldrich 1979; Boyd and Gove 2006; Dess and
Beard 1984). In particular, contingency theory suggests that the external circumstances that organizations confront are likely to have important effects on organizational outcomes (see Donaldson 2001; Miles and Snow 1978; Perrow 1970). Theories
of the organizational environment advanced by scholars adopting a contingency
perspective suggest that the relative munificence, complexity and dynamism of the
circumstances faced by organizations are likely to influence their behaviour and
outcomes (Dess and Beard 1984). Environmental munificence (or exogenous resource
capacity) is thought to be associated with better organizational performance,
while complexity (client homogeneity-heterogeneity and concentrationdispersion) and dynamism (environmental instability and turbulence) are assumed
to increase the degree of task difficulty and so lead to worse performance. These
relationships are arguably likely to hold for both “objective” archival measures of
the environment drawn from secondary administrative sources and “subjective”
perceptual measures of the environment drawn from surveys of practising
managers.
Despite a growing evidence base supporting linear patterns in the environmentperformance relationship in both the public (e.g. Andrews 2009; Meier and Bohte
2003) and private sectors (e.g. Keats and Hitt 1988; Sheppard 1995), it remains
conceivable that the effects of different dimensions of the environment are not
straightforwardly positive or negative. The benefits of environmental munificence
may turn negative as organizations become complacent or overconfident in their
capacity to keep on doing what they did well in the past. Likewise, at low-medium
levels, complexity and dynamism may actually sharpen managerial awareness
of the challenges to be confronted, at least until the environment becomes too
complicated or unpredictable to manage effectively. However, to date, there
has been little systematic research examining nonlinearity in the organizational
environment-performance relationship using either objective or subjective
measures of the environment. Does the impact of external environmental
circumstances on organizational performance follow a linear or nonlinear
pattern? Do managerial perceptions of organizational environments affect the
achievements of organizations in consistent or different ways depending on the
strength of those perceptions? To answer these questions, this paper explores
linearity and nonlinearity in the relationship between “objective” recorded and
“subjective” perceived environments on the performance of a set of over 500
public organizations.
In the first part of the paper, Dess and Beard’s (1984) model of the organizational
environment is formalized and arguments on linearity and non-linearity in the
environment-performance relationship developed. Measures of performance, along
with archival and perceptual measures of environmental munificence, complexity,
and dynamism are then identified and described. The results of statistical models of
the environmental determinants of performance in over 500 Texas school districts are
presented, before the findings are discussed and conclusions drawn for theories of
organizational performance.