Research Article: 2024 Vol: 28 Issue: 6
Goal Implications of Organizational Identity on SME???s: A Theoretical Review
Wasseem Abaza, Zayed University
Citation Information: Abaza, W (2024). Goal Implications of Organizational Identity on SME’S: A Theoretical Review. International Journal of Entrepreneurship, 28(S6),1-10
Abstract
SME’s are unique in that they encompass a number of internal stakeholders and they interact with a large number of external stakeholders. Because of this it may be difficult to navigate all the opposing desires necessary to achieve large-scale goals. For this reason, it is beneficial to understand ways in which success can be enhanced for these companies. This paper explores organizational identities of SME’s through a social constructionist lens and their theoretical effect on the goals of SME’s. The proposed theory is that the congruence of an internally constructed and externally constructed identity has a positive effect on SME outcomes. This theory is discussed through a review of relevant literature in Social Constructionism and Organizational Identity to form a proposition of how socially constructed identities of SME’s can effect success.
Introduction
Small and Medium Enterprises (SME’s) are unique in many ways, but one consistency is that they encompass a number of stakeholders, and they interact with a large number of external stakeholders. Because of this, it may be difficult to navigate all the opposing desires necessary to achieve large scale goals. Thus, it is beneficial to understand ways in which success can be enhanced or hindered for these organizations. With so many stakeholders holding varied understandings of a company at its early stages of development, perceived identity play a crucial roll in achieving goals (Brickson, 2005; Abimbola & Kocak, 2007; Abimbola & Vallaster, 2007; Partanan et al., 2018).
This paper proposes to explore organizational identities of SME’s through a social constructionist lens and the effect congruent perceived identities may have on achieving its goals. When the identity constructed by members within the company is more congruent to the identity constructed by those outside, then the company should achieve its specific goals faster and more efficiently (Partanan, 2018). In other words, identity as seen by outsiders should have a moderating effect on the relationship between the internal identity and the success of the SME’s goals.
The analysis begins with the assumption that organizational identities are socially constructed, meaning they are created through social processes, based on the original work of Burger and Luckman’s (1967) on the social construction of organizations. They assert that the identity of an organization will create a reality in which internal members and external stakeholders will operate. If the internal and external stakeholders function within the same reality and they both view the identity of the organization the same way within the given context, then they should be better able to function with each other. SME’s must rely on good relationships with external stakeholders to aid and advance crucial initiatives that cannot be achieved through internal processes alone. Functioning within the same reality allows the members of the organization to communicate on the same level with the external stakeholders granting the organization a better reputation, increased communication, and increased access to resources all of which are necessary to achieve the specific goals of the SME (Berger & Luckman, 1967; Partanen, 2018; Rokhim, Mayasarai & Wulandar, 2021). If their external identity does not match their internal identity, then they may find themselves at a disadvantage.
Social Constructionism
Social Constructionism is the idea that what we know is created through the relationships and interactions between people (Gergen, 1985). Since the concepts used in Social Constructionism date back centuries, it will be impossible to be exhaustive. For this reason, a brief overview is provided.
Social Constructionism as a theory has its roots in theories by Karl Mannheim (1951) who developed the “Sociology of Knowledge”, which tries to understand how different forces create knowledge and what type of knowledge is created. What was seen as scientific fact was questioned and subsequently believed to be a manifestation of scientific discourse. They became fact through the process of agreement by the scientific community and not by any objective measure of what constitutes fact (Hruby, 2001).
Kenneth Gergen’s formulation of Social Constructionism melds the fields of Psychology and Sociology in that he believes social inquiry is used to understand the nature of knowledge (1985). For him, psychology alone is not enough to understand how humans understand the world and how knowledge is created in that world. Rather, he views psychology as a social process which calls into question all that is known and what can be known in the future. Social inquiry encompasses both epistemological inquiry and the philosophy of science itself (Gergen, 1985; 1994a). Social constructionist inquiry, according to Gergen, is interested in explaining the processes by which people account for the world in which they live. This includes understanding and explaining themselves within that world (1985).
According to Gergen, what humans experience as the world is not itself a direct description of the world (1985; 1994b; 2000). Rather, Social Constructionism is a shared understanding of the world as well as the process used to generate, stabilize and change that understanding (Gergen, 2000). Further, since the social construction of knowledge is an active process, it can be recreated through modern contexts thus giving it new meaning. Individual differences that people bring to knowledge in that one’s own experiences can also play a role in their understanding of the world (Jackson, 2007).
Traditionally, science attempts to look for an objective truth and meaning behind action that can be applied in a general sense (Gergen, 1994a). However, through a Social Constructionism lens the world is contextual and dependent on the ways humans construct the meaning behind action. Since any action is subject to multiple interpretations depending on the people observing it, issues will arise over the relative strength of those interpretations (Gergen, 1994b; Lensvelt, Hassett & Colbridge, 2021). It is this last point that leads to the creation of a collective framework through which further interaction takes place.
This search for meaning behind action is an expansion of what Karl Weick spoke of in the 1979 edition of his book The Social Psychology of Organizing (Wicker, 1980; Czarniawska, 2005; Lehmann-Willenbrock, 2024). Weick was principally interested in a new way of understanding organizations but he included a great deal on how sense making takes place within organizations. Weick first questions the assumption that organizations are rigid, solid and static. Rather, he sees them as continual processes where meaning is made more clear through coordinated actions of the individuals working within them (Weick, 1979). Actions are dictated by the individual and by the response of others to those actions (Weick, 1979). In essence, people are constantly readjusting themselves due to social interactions with others within the organization and that constitutes sense-making forming the basis for organizing (Weick, 1995).
Action within organizations is a process of determining what to act on and what meanings are given to the results of those actions. For Weick, this process is complicated by the multitude of opinions and varying interpretations and a great deal of time in companies is spent on consensus building (1979). Organizational outcomes then are the result of interactions of individuals with diverse perspectives (Wicker, 1980; Greco, 2024). This is similar to the idea that Gergen uses in his discussion of the social aspect of knowledge creation. While Gergen takes the idea one step further to describe sense-making in general, Weick explores it in a very directed way in describing sense making specifically within organizations.
Identity’s Effect on SME’s
SME’s come in many different forms, so identity plays a large role and some even believe it provides a purpose for the company. Gearge McCall and J.L. Simmons (1966) argue that identities provide a reason for action by informing what an actor’s goals are and the strategies they use to achieve them. Shared information and knowledge naturally leads to shared beliefs and common interests where the evolution of that knowledge is closely linked to the surrounding ecosystem.
The idea of Organizational Identity was first introduced by Albert and Whetten (1985). They provided the first theoretical framework suggesting that companies can have identities just as individuals have identities. Since then, the concepts have been applied to a variety of topics from issue management (Dutton & Dukerich, 1991), individual roles and identities within companies (Ashforth and Mael, 1996; Kreiner et. al., 2006), and strategy (Gioia & Thomas, 1996). At first researchers attempted to identify what an organizational identity could be (Albert & Whetten, 1985; Gioia & Thomas, 1996). Later questions arose surrounding how an organizational identity could change (Dutton & Dukerich, 1991; Fox-Wolfgramm et al., 1998). Others were interested in how threats impact it (Elsbach & Kramer, 1996; Ravasi & Schultz, 2006).
Ideas on what an Organizational Identity is vary somewhat but Albert and Whetten (1985) presented three criteria for what an Organizational Identity is or should be. The first is what they call “The Criterion of Claimed Central Character” (1985:205). The purpose is to identify what the essence of the company is. A statement of central character should distinguish a company on the basis of something important and essential (Albert & Whetten, 1985). However, because importance is difficult to distinguish (i.e. what characteristics are important and what are not), Albert and Whetten admit that this criterion is dependent on the situations in which characteristics of the company are examined. Instead they propose that one must judge what is and is not central to each company separately given a specific purpose and theoretical viewpoint (1985:206).
The second is what they call “The Criterion of Claimed Distinctiveness” (1985:205). This criterion is the one most associated with the concept of identity because it is meant to identify characteristics of a company that are distinctly different from other companies. In business terms, this could be thought of as a competitive advantage of core competency.
The final criterion is “The Criterion of Claimed Temporal Continuity” (Albert & Whetten, 1985:205). This criterion is concerned more with the maintenance of identity over time, however, this is not always easy. The problem is that companies can change over time and so this criterion may suggest that change is difficult. Albert and Whetten do not explain this in much detail but rather discuss how change over time involves some form of loss. They were concerned with rituals conducted for events such as closings of plants or selling off divisions or subsidiaries and how these change identity (1985:412). The point of the criterion, however, is that there must exist some degree of persistence of the identity over time. See table 1 for the link between Organizational Identity and SME’s.
| Table 1 Link Between Organizational Identity Criteria and Sme's | ||
| Criteria | Definition | SME’s |
| Claimed Central Character | -Essence of an organization -Distinguish organization on basis of something important and essential |
-Vision -Mission |
| Claimed Distinctiveness | -Characteristics distinctly different from other organiz ations -Recognizably different from other organizations |
-Competitive Advantage -Core Competence |
| Claimed Temporal Continuity | -Maintenance of identity over time -Identity persists for some period of time |
-Organizational Development -Scalability |
Albert and Whetten believed that these criteria should be used to either create an Organizational Identity or to evaluate one that already exists. They view defining identity as a scientific concept that meets all these criteria. A good definition, and one that will be used in this paper is a “collective, commonly-shared understanding of the [company’s] distinctive values and characteristics” (Hatch & Schultz, 1997).
This resonates with David Cooperrider’s Positive Image, Positive Action: Affirmative Basis of Organizing (2000). Here, Cooperrider views companies as products of human interaction and found in the mind rather than some objective expression of nature. This image of companies is shared by many other researchers (Berger & Luckman, 1967; Pfeffer, 1981; Unger, 2004; Bolade-Ogunfodun et al., 2023).
Taking this idea of companies and applying it to the concept of Organizational Identity, it can be clear that the identity of a company is dependent upon the members of the company. However, it is not the sum of individual identities but rather a socially constructed identity created through the collaborative efforts of the members as they interact with one another (Nabers, 2003). The individual member and the company are connected and should not be seen as separate in this respect. Weick argues this by advocating that we ignore the level of analysis and view companies not as the sum of the individual parts but rather a discursive identity (Weick, 1996; Salancik, 1977).
This definition is interesting because it emphasizes the rules and norms of behavior. The implication is that institutions base their existence on socially shared concepts of cooperation and collective action. The differing types of companies across the globe highlight the natural differences in culture or social norms that are officially or unofficially adopted by the members of those companies. The social system that makes up SME’s is therefore a combination of the social values shared by members of the company and the practices of the members (Jack & Westwood, 2006).
Organizational identity exists irrespective of the identities of the individual members and thus represents a collective framework within which members develop their own perceptions of the companys’ identity (Elstak, 2008). It is not the collective identities of the individuals but rather the collective perceptions, or coherence, of what the company’s identity is by those individuals. This perception forms the reality within which members function. This socially constructed process forms the main driver for organizational identification and desired behavior (Elstak, 2008).
A modern issue in Organizational Identity literature is the ability of companies to reconcile internal and external demands that may be in conflict when perceptions are shifting (Van Rekom et al., 2008; Tolkamp, 2021). Researchers look for the role identity plays in influencing managerial choices. Several articles have discussed the dichotomy of an internally constructed and externally constructed identity with variation in the degree to which the two influence each other (Dutton & Dukerich, 1991; Gioia & Thomas, 1996; Elstak, 2008; Hatch & Schultz, 1997; Van Rekom et al., 2008; Tolkamp, 2021). An internal identity is simply understood as the identity members hold of the company. An external identity is a little more difficult to understand and may best be defined as the image or reputation of the company (Hatch & Schultz, 1997). Specifically it is the image or reputation held by the external stakeholders.
Of significance, is that there are always internal and external stakeholders that will define, understand and evaluate companies. This process hinges upon an Organizational Identity since a poor or weak identity can have negative consequences for an company including lack of acceptance, poor reputation, reduced legitimacy and can negatively impact access to resources (Fombrun, 1996; Glynn & Abzug, 2002; Cheney & Christianson, 2003; Hsu & Hannan, 2005).
Another issue that has arisen in the Organizational Identity literature is the problem with measurement. Since identity is difficult to pin down, it is equally difficult to measure quantitatively (Elstak, 2008). Few publications have used quantitative methods to measure identity (Dukerich et al., 2002; Foreman & Whetten, 2002; Brickson, 2005; Kujala et al., 2022) but for the most part there is disagreement as to how measurement of identity can take place because of the difficulty in deciding what form Organizational Identity takes (Elstak, 2008). The social constructionism theory believes that members collectively create a shared understanding of who their company is through social interaction (Elstak, 2008).
Congruence of Internal and External Identities
The proposed relationship between identity and success is that an external identity that closely matches an internal one will lead to success because that identity creates a reality in which members function within. If there is coherence on the identity, then internal processes will function efficiently since all members will function based on the same reality. Further, a company’s externally constructed identity moderates this relationship because success can depend upon external forces. Figure 1 shows the proposed relationship. The external identity also creates a reality in which external stakeholders function. As such, if both the company and its external stakeholders function within the same reality then external stakeholders will be more likely to understand and cooperate with the company. Further, external stakeholders should be more likely to positively interact and support the company if they resonate with the company’s vision and mission (Gold, 2009). For the SME, this eases the facilitation process of working with external stakeholders necessary to achieve its goals.
Figure 1 Proposed Relationship between Socially Constructed Identities (Internal and External) and Success
The internally constructed identity of a company is operationalized as the extent to which the identity is agreed upon (the coherence of the identity) by the members of the company (Elstak, 2008). The collective understanding of members highlights a point that links the socially constructed organizational identity to SME’s, the idea of collective identity.
An externally constructed identity is operationalized the same way, however, who the ‘members’ are will vary. Because socially constructed identities are situation and individual specific, it would stand to reason that an externally constructed identity will vary quite a bit and overall there may not be any coherence by all groups outside the company. However, by limiting the identity construction to the specific stakeholders of a given situation it may be possible to have agreement and it still allows comparison with the internal identity as well as remaining within the bounds of the specific situational goal of the company.
In order to be similar enough to measure a relationship with the internally constructed identity of a SME, success will have to be situation specific. Therefore, success is defined as accomplishing a specific goal to the satisfaction of the company. The congruence of the two identities is important because SME’s rely on external stakeholders to accomplish goals (Cheney & Christiansen, 2003; Partanen, 2018). Price and Gioia (2008) advocate a constant monitoring of the internal and external congruence because it can minimize the harmful effects of divergent representations. These can include lack of acceptance, reduced legitimacy, reduced access to resources, etc (Foreman & Parent, 2008). Further, King and Whetten (2008) delve into issues of legitimacy and reputation and the effects of external perceptions on these company goals. They believe that a company must manage the image they present to outsiders in order to gain legitimacy and gain a positive reputation, the former they believe is a requirement of all companies (King & Whetten, 2008). These in turn translate into positive relationships with external stakeholders and increased access to resources, both of which can lead to success in achieving goals.
Further Avenues of Research
Two potential avenues of research that go beyond the scope of this paper are how can or do SME’s change their identities to fit their goals and to what extent does the internally constructed identity effect the externally constructed identity. With the first, there is an implied normative characteristic to having congruence between internal and external identities. When incongruence exists, companies would want to know how to change either their identities (only if the goal is a major one) or how to change the external identity. As such, research looking at how the latter can be done would provide a great benefit to companies in general but to SME’s especially because they function on a higher level of risk.
The second avenue is somewhat related to the first but it looks at the influence of the internally constructed identity on the externally constructed one. An assumption attached to this avenue of research is that external stakeholders construct their image of the company’s identity from two sources of information. One is directly from the company (advertising, website, social media, etc.) and the second is from secondary information from sources other than the company itself. It would be expected that the former would show that the internal identity has more influence on the external identity while the latter would show the opposite (or no effect at all). Provided that the proposed relationship in this paper is demonstrated through empirical research, these two avenues of research would provide very helpful information to SME’s and consultants.
By viewing organizational identity as a socially constructed phenomenon, the proposed relationship can take on a prescriptive characteristic. If identity is socially constructed then it can be changed so that incongruence can become congruence. Such a process can be proposed after further empirical study into SME identity is conducted.
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Received: 29-July-2024, Manuscript No. IJE-24-15301; Editor assigned: 01-Aug-2024, Pre QC No. IJE-24-15301 (PQ); Reviewed: 15-Aug-2024, QC No. IJE-24-15301; Revised: 20-Aug-2024, Manuscript No. IJE-24-15301 (R); Published: 28-Aug-2024