Triggers of Organizational Change: Duration, Previous Changes, and Environment

Abstract

This article explores triggers of organizational change. In particular, how the likelihood of future changes is influenced by duration between the changes, the number of previous changes, and the surrounding conditions. Rule changes are analysed by examining factors that influence US states to update their excise tax rates on beer and cigarettes using panel data for 48 contiguous states. We provide evidence in favour of the deceleration hypothesis: prior changes of a given type decrease the likelihood of a subsequent change of the same type. We found support that the likelihood of organizational change increases with duration (the time between the changes). States updated their beer and cigarette tax rates in response to accumulation of inflation not letting the rates to become obsolete. Finally, our results indicate that changes in surrounding conditions positively influence the probability of change. State legislators take the opportunity of changes in the neighbouring states to change their own taxes. A logit model to estimate the probability of change and a hazard model to estimate the time to change are employed.

Key Words:

• Organizational change
• causes of change
• deceleration hypothesis
• repetitive momentum hypotheses
• duration
• state excise taxes
• hazard models

Notes

1 For the comprehensive literature review, see Beck, Brüderl, and Woywode (2008).

2 Other papers on the subject include Besley and Rosen (1998), Case, Rosen, and Hines (1993), Besley and Case (1995), Heyndels and Vuchelen (1998), Wu and Hendri (2009), and Brueckner and Saavedra (2001).

3 The number of data points used in regressions is shorter in order to calculate the time from the last change.

4 Beer taxes vary by alcohol content (e.g. 3.2 beer vs. stronger beer), size of container (e.g. cans vs. barrels), and on-premise vs. off-premise. For problems on finding a uniform tax rate measure see Young and Bielinska-Kwapisz (2002, 2003, 2006).

5 It takes a value of 1 in the year following the change, of 2 in the next year, and so on.