Table Of ContentSebastian Frankenberger
Management of Regulatory Influences
on Corporate Strategy and Structure
GABLER EDITION WISSENSCHAFT
Sebastian Frankenberger
Management of Regulatory
Influences on Corporate
Strategy and Structure
With a foreword by Prof. Dr. Gunter MiJller-Stewens
Deutscher Universitats-Verlag
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Dissertation Universitat St. Gallen, 2006
I.Auflage August 2006
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Foreword V
Foreword
In recent years regulation and deregulation issues grew into a major concern of corpo
rate management. Asked about their biggest pain points, managers from different
businesses, not only network-based industries like telecommunications, transportation,
and energy, but also chemicals or food and beverages, mentioned uncertainty resulting
from regulation. Despite this fact, strategic management has so far widely neglected
the interactions and inter-dependencies between corporate and regulatory actors.
With this dissertation, the author aims at closing this gap through a better integration
of external, regulatory actors into the strategy formation process. More specifically, he
asks how regulatory actors impact corporate strategy and structure and how corporate
management can proactively manage this type of external involvement.
Based on an extensive literature review, the author shows that extant models of the
strategy formation process focus almost exclusively on actors internal to the firm; ex
ternal actors are widely neglected. In general, they have been condensed under rather
abstract conditions of the environment (such as uncertainty or complexity). If explic
itly considered, only selected elements (e.g., innovativeness, diversification, or organ
izational design) have been analyzed in primarily content-based, quantitative, cross-
secfional studies. A broader understanding of the complex inter-dependencies and mu
tual influences between corporate and external actors remains lacking.
With the help of neo-institutional theory and a longitudinal, retrospective case study
approach in the German energy sector, the author elaborates if strategy formation as
represented by corporate resource allocations is influenced by regulatory actors. He
also explores how strategy formation is impacted in terms of internal alignments of
corporate strategies and structures. And finally, he elaborates on the corporation's ex
ternally directed responses in order to reversely influence its environment. Comparing
results across two regulatory initiatives (market opening and emission trading) and two
sub-units of analysis (E.ON Energie and E.ON Ruhrgas), he first develops context-
specific propositions related to these three research questions. Then, he generalizes his
findings on a higher theoretical level.
In brief, this dissertation presents four major contributions: (1) Regulatory actors affect
strategy formation. In particular, and in a situation when a regulator changes from pro
tecting the firm to promoting change, the consistency between resource allocations and
the official concept of corporate strategy decreases when regulatory involvement in
creases. (2) Internal alignments are contingent upon the perceived opportunity struc-
VI Foreword
ture of a regulatory initiative. When perceived as an opportunity, adjustments to the
concept of corporate strategy and to portfolio configuration are dominant. When per
ceived as a threat, internal alignments focus on management systems and organiza
tional design. (3) Externally directed responses depend on the same contextual vari
able: If regulatory initiatives are perceived as an opportunity, consensus-oriented
strategies of information, negotiation, and partnering dominate. If they are perceived
as a threat, external responses focus on resistance-oriented strategies of deferment and
manipulation. (4) Integrated management combining internal alignments (market
strategies) and externally directed responses (non-market or political strategies) repre
sents an appropriate way of managing regulatory influences. Through non-market
strategies, corporations may influence institutional processes that impact their scope of
operations. Through their market strategies, they can optimize their business within
institutional boundaries (e.g., through customer service orientation, brand building, or
efficiency improvements).
Overall, this study presents interesting insights into the formation of strategies, refines
existing strategy models, and crosses the boarder between market and political strate
gies, a field which has so far been left to business-and-society literature. For this rea
son, the work of Sebastian Frankenberger advances theory and forms a valuable basis
for future research. At the same time, he managed to provide helpfiil frameworks and
tools that make this study equally relevant for business practitioners.
Prof Dr. Giinter Muller-Stewens
Preface VII
Preface
Looking back three years from now, I remember very well the first steps I undertook
for this dissertation. Coming back from business life, I re-entered the world of acade-
mia and encountered an environment that facilitated new perspectives on management,
society and life. Personally, those three years have been intellectually challenging and
extremely enriching, something I would never want to miss. At the heart of this ex
traordinary experience were the people who accompanied my way. In the name of all,
some shall be mentioned.
First of all, my thanks go to my doctoral advisor Prof Dr. Gtinter Mtiller-Stewens.
Besides his unquestioned expertise in the field of corporate strategy and strategy proc
ess, which he is always open to share with young colleagues, he also proved to possess
outstanding people skills. Among those are his abilities to create an atmosphere of
trust and to inspire others through his personal way of communicating. I may add that
he is one of the most charismatic people I met in my life, and a professional and per
sonal role model for many young people.
I also wish to thank Prof Dr. Thomas Dyllick, the co-advisor of my dissertation. His
intellectual capacity always enabled him to provide constructive feedback and orienta
tion, which he always presented in a very friendly manner. And whenever I myself had
doubts about any particular weakness in my dissertation, I could be sure he had al
ready identified it. Finally, my thanks go to Prof Dr. Christoph Lechner who - without
having a formal role in my dissertation - never hesitated to challenge my thoughts and
provide helpful feedback.
I further thank the Institute of Management, the University of St. Gallen and the Swiss
National Science Foundation for providing the right infrastructure and resources for a
successful dissertation and the opportunity to spend six months at Harvard Business
School in Boston.
At HBS, I owe considerable gratitude to Prof Forest Reinhardt and his willingness to
cooperate on the editing of an HBS case study on corporate strategy at the German
energy giant E.ON. Thanks to his support, I was able to challenge my research at a
very high level and to experience the exciting and inspiring atmosphere at Harvard
University. I also want to thank Andrew Feldman and the folks of MIT Euroclub for
their friendship and personal support.
Like any dissertation, this study would not have been possible without the support of
practioners that provide the empirical data. For this reason, I am particularly thankful
VIII Preface
to all my interview partners at E.ON AG and elsewhere who dedicated their time and
knowledge to this dissertation. In the name of all, I would like to thank Bemd Zizow,
Dr. Diana Kolb, Christopher Delbriick, and Dr. Dierk Paskert.
As mentioned above, it is always the people that make any experience special. And
there are many friendships that were bom during my stay in St. Gallen and that will
hopefiilly last for ever. To start with my research fellow and all time wingman Sebas
tian Knoll who walked on my side during my first steps as a researcher, who provided
me with a comer to sleep in his one-room apartment, and who shared his thoughts on
anything at anytime. Thanks Sebastian! Also, I would like to thank Manuel Seyferth
for his great friendship, his skill to organize all kind of events, and his hospitality.
Thanks to Dr. Katharina Klockner and Dr. Wolfgang Jenewein for hosting Champions
League evenings and their great humor.
Being aware of the space limitations, I would like to briefly mention the following
people knowing that behind any name there is a great story of intellectual exchange,
personal support and leisure relief: Dr. Christian Bender, Dr. Berislav Gaso, Nicola
Gesing, Susanne Hoare-Widmer, Frank Hom, Pedro Huerta, Dr. Mirko Jazbec, Florian
Kappler, Fridericke KoUmann, Markus Kreutzer, Niklas Lang, Peppi Schnieper, Isa-
bell Kuschel, Michaela Solterbeck, Harald Tuckermann, Dr. Hendrik Vater, Inga Voss,
and my long-time friend "Bifi" Christian Strasser and all the other folks that supported
this dissertation when playing "Schafkopf cards with me.
Not to forget about my former and current employer Mercer Management Consulting
who showed flexibility and provided resources which made this dissertation project
much easier. Thanks to my advisor Wolfgang Krenz, my team leader Thomas
Kautzsch, and my doctoral colleague Jan Burgard.
Finally, and most importantly, my thanks go to my family. Without them, I wouldn't
be where I am; evidently, I wouldn't be at all without my parents. For this reason, I
guess it is suited to dedicate this work to Ute and Fredy Frankenberger. Not only for
their constant support during this dissertation, but for the life they enabled for me, for
their unconditional support, their dedication to my well-being, and their love. At the
same time, I want to thank my grandmother Maria Frankenberger.
Fortunately, I can tell that my family grew bigger during this dissertation since I was
lucky to find the white princess of my life, Dr. Karolin Marx. Without discrediting her
father Eberhard Marx, I owe particular gratitude to her mother Karin who transcribed
Preface IX
all interviews for me. And I hope she knows that I am very well aware of how big of a
help this was for me. More importantly, I am happy to have them as my parents in law.
I could go on with thanking John Harvard's Brewehouse in Cambridge for making the
best chicken wings in the world, the Boston Red Sox for winning the world series, the
"Kleiner Ochsenbrater" at the Viktualienmark in Munich for the best "Ochsen Zwibel-
rostbraten"; but actually, there is just one person left.
Since this person is so special, I keep on feeling that no words are suited expressing
my feelings about her. Beyond any experience I gained during this dissertation, there
is one thing that stands high above. Thanks to the great ability of our joint doctoral
advisor in selecting his students, I was able to meet the woman of my life. And instead
of dedicating this piece of work to her, I decided to dedicate my life to her. If ever, I
should dedicate a book to her, it should be about poetry and not about management.
And Karolin, once again, I love you, and I want to spend the rest of my life with you.
Sebastian Frankenberger
Table of contents XI
Table of contents
Table of contents XI
List of figures XV
List of abbreviations XIX
1 Introduction 1
1.1 Dissertation as part of the ICS Research Project 1
1.2 Research objective and guiding questions 2
1.3 Theoretical relevance 7
1.4 Practical relevance 11
1.5 Outline of dissertation 12
2 Theoretical background 15
2.1 Strategy process research 16
2.1.1 General conceptualizations and principles 17
2.1.2 A look at prominent strategy process models 20
2.1.3 Strategy formation and the environment 27
2.1.4 External actors and their influence on strategy and structure 30
2.1.5 Overarching constructs: consistency, fit, and alignment 37
2.1.6 Performance outcomes 44
2.2 Organizational theory lenses on strategy process 46
2.2.1 Criteria for theory selection 47
2.2.2 Evolutionary theory 49
2.2.3 Stakeholder theory 53
2.2.4 Neo-institutional theory 57
2.2.5 Critical evaluation of theory lenses 62
