On Environment: Dimensions and discourse

One of the most important contributions in environmental studies came from Dill (1958), where he
differentiated between general and task environment. He define organization’s task environment as ‘one
which is potentially relevant to goal setting and goal attainment...consisting of inputs of information from
external sources… stimulus to which the organizations responds’ (pp.410-11). In his study of two
Norwegian business firms, Dill identifies four key task environments- customers (both distributors and
users), suppliers (of material, labor, equipment, capital, and work space), competitors (for both markets
and resources), and regulatory groups (government agencies, unions, and interfirm associations). The
author further specifies six key attributes of these task environments: 1) degree of unity and homogeneity;
2) degree of stability; 3) disruptiveness of environmental inputs; 4) demand for direct personal
interaction; 5) routing of inputs; and 6) complexity of inputs.
A detailed investigation on organizational environment was carried out by Emery and Trist (1965).
Drawing insights from field-theory and systems-theory, and taking an open-system view, the authors
propose that any meaningful understanding of the organization needs an understanding of its
environment, calling this as – the causal texture of the environment. Emery and Trist proposed four ‘ideal
types’ of causal textures of the environment. The simplest type is ‘placid, randomized environment’,
where goals, and goods and bads are relatively unchanged in themselves and randomly distributed,
leaving no distinction between tactics and strategies. Slightly more complicated one is ‘placid, clustered
environment’ where goals, and goods and bads are not randomly distributed, but are clustered, and where
strategies are needed to understand and survive in the environment. The organizations tend to be
organized centrally and in a coordinated manner. The next level is ‘distributed-reactive environment’,
where a number of similar organizations co-exist and strategies are needed to craft organizational
objectives to meet competitive challenges. Here the control becomes more de-centralized to be able to
respond to environmental changes. These three types of environments are well studied in the fields of
biology, economics, and mathematics. The most complex environment called ‘turbulent fields’, where the
field itself introduces dynamism on to the organization, apart from complex interaction between
organizations. Here organization gets increasingly enmeshed with society and polity, and this calls for
capability building to compete effectively. These ideal-types vary based on degree of system
connectedness, and field forces.
In the landmark work on integration and differentiation in organizations, and the resulting contingency
theory, Lawrence and Lorsch (1967) identify three dimensions on which certainty of a sub-environment
could be studied. These are: 1) the rate of change in environmental conditions; 2) the certainty of
information at a given time about the environmental conditions; and 3) the time span of definitive
feedback from the environment. Greater uncertainty is characterized by high rate of change, low certainty
of information, and a longer time span of feedback. Based upon these normative characteristics, the
authors conclude that, of the three organizational sub-environments- science, market and technical-
economic, science is relatively least and technical-economic is most certain.
In another influential work published in the same year, Thompson (1967) develops on Dill’s
conceptualization of organizational task environment to confer it with two dichotomous dimensions:
homogenous- heterogeneous, and stable-shifting. The homogeneous-heterogeneous dimension reflects the
level of environmental complexity, whereas stabile-shifting category reflects the level of variations the
task environment exhibits.

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Amidst the contingency theory discourse propounded by Lawrence and Lorsch (1972) and Thompson
(1972), even the proponent of strategic choice model- John Child (1972) did not ignore the environment
in favor of agency. Child observes that three environmental characteristics determine the extent of change
experienced by the organization. These are complexity (level of heterogeneity), variability (degree of
change), and illiberality (hostility and threat).
Observing that research on organizational environments has suffered from a lack of conceptual clarity on
environmental elements, Duncan (1972) defines the environment as ‘totality of physical and social
factors that are taken directly into consideration in the decision-making behaviors of individuals in the
organization’ (pp.314). Classifying environment into internal and external, he identified three
components of internal environment (such as organizational personnel, organizational level, etc), and
factors within each; and five components of external environment (such as customer, suppliers, etc), and
corresponding factors. To empirically study how perceived uncertainty influences executive decision
making, Duncan classified organization’s environments on two dimensions: 1) simple- complex; and 2)
static-dynamic. On simple-complex dimension, simplicity refers to the degree to which factors, in
external and internal environments, influencing decision making are fewer in number and similar to one
another in that they are located in a few components. On the static-dynamic dimension, dynamism refers
to degree of change in factors and frequency with which new and different factors are considered during
decision making. An empirical study of decision making in manufacturing and R&D organizations shows
that static-dynamic dimension is more important contributor to uncertainty than simple-complex
dimension.
Building on the contingency theories proposed by Thompson (1967) and Lawrence and Lorsch (1967),
Jurkovich (1974) propose an exhaustive typology of organizational environment. The general
characteristics of the environment comprises of: 1) complexity (extent of diversity); 2) routineness or
non-routineness of problem-opportunity state (level of disturbance caused to current activities); 3)
presence of organized or unorganized sectors (whether or not governed by formal or informal rules); and
4) direct or indirect relation with organization (necessity of intermediaries). In terms of environmental
change, the dimensions are: 1) high- low change rates; and 2) stable-unstable change.
Staw and Szwajkowski (1975) was amongst the first ones to draw attention to important environmental
attribute- scarcity- munificence dimension. The authors propose that ‘less munificent is the organization’s
environment, the more effort the organization will exert to obtain resources from the environment.. and
more is the likelihood of organization participating in legally questionable activities’ (1975: 346-47).
Stating the difficulty in specifying where the organization ends and the environment begins, Miles and
Snow (1978) decreed environmental uncertainty as the most important dimension in understanding
organization-environment relationship.
A more parsimonious view of environmental dimensions was proposed by Pfeffer and Salancik (1978) in
their landmark work ‘The External Control of the Organizations’. The authors proposed three elemental
structural characteristics of environment: 1) concentration (the extent of spread of power and authority in
the environment); 2) munificence (availability or scarcity of critical resources); and 3) interconnectedness
(number of patterns of connections between organizations). These environmental characteristics
determine uncertainty in the following manner: high concentration, coupled with resource scarcity (low
munificence), result in conflict; while greater interconnectedness, together with resource scarcity, lead to

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interdependencies; which eventually, in conjunction with conflict, manifests into environmental
uncertainty. The relationship between the structural characteristics is depicted in Appendix 1.
Observing the predominance of narrow conceptualization of environments, Tung (1979) offered a more
elaborate typology of studying relevant organizational characteristics. At the outset, the author
distinguished between ‘composition of organizational environments’ and ‘environmental characteristics’,
where former refers to factors and components comprising the focal organization’s environment, as
depicted by Duncan (1972); whereas latter indicates the attributes of the environment or its causal texture
(Emery and Trist, 1965). Taking environmental uncertainty as the most critical feature of an environment,
the relevant dimensions that impact perceived uncertainty are: 1) complexity (heterogeneity of factors or
components); 2) change rate (frequency and magnitude of turbulence); and 3) routineness of problem/
opportunity state (variability and analyzability of environmental stimulus).
In the classic text titled ‘Organizations and Environments’ Aldrich (1979) offered a comprehensive
description of various dimensions on which organizational environment could be studied. Based upon the
nature and distribution of resources in the environment, the six dimensions identified are: 1) capacity
(richness or scarcity of resources available); 2) homogeneity-heterogeneity (level of standardization of
environmental elements); 3) stability-instability (degree of turnover in elements of organization); 4)
concentration-dispersion (evenness of resource distribution); 5) Domain consensus/ dissensus (legitimacy
of organizational claim on a domain); and 6) turbulence (disruption and rate of causal
interconnectedness). Aldrich observed that these dimensions, relevant to environmental selection, exist as
a continuum, instead of being dichotomous.
Building on the six dimensions offered by Aldrich (1979), Dess and Beard (1984) propose a more
parsimonious and generalizable characterization of organizational task environment with dimensions
comprising of: 1) munificence (environment that supports growth and stability); 2) dynamism
(environment characterized by turnover, absence of pattern, and unpredictability); and 3) complexity
(environment with high information processing requirement). Using a factor analysis on 23 relevant
industry variables, the authors show that these three factors are a robust representation on environmental
variance.
With an objective of bringing environment to the centre of discourse on strategy formation and execution,
Bourgeois (1980) identified a hierarchical view of the organizational environment. At the most elemental
level is the distinction between objective environment and subjective environment. The former refers to
the objective set of components or state of affairs outside the organization, whereas the latter is managers’
perception of the environment. Based on this distinction, the author proposes three view of environment,
comprising of objects, and attributes (from external objective environment); and perceptions (from
internal subjective environment). The objects comprise of general and task environment, as depicted by
Dill (1958); the two key attributes are– complexity (heterogeneity) and dynamism (turbulence or
volatility); and finally the perception is that of environmental uncertainty.
Observing that ‘perceived environmental uncertainty’ is an ill-defined construct, as reflected by lack of
consistency in research results, Milliken (1987) propose three types of environmental uncertainty, and
suggests that a more fine-grained understanding will help better operationalized the construct. The first
one is state uncertainty, which stems from unpredictability about how components of the environment
might change, or the interrelationship between those. The second one is effect uncertainty which renders a
manager incapable of predicting the impact future states of environment would have on the organization.

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Finally, response uncertainty is associated with lack of knowledge of response/ options available and
their consequence to cope with the uncertainty.
Building on the work of Staw and Szwajkowski (1975) on environmental munificence, Castrogiovanni
(1991) cites two reasons for limited study of this vital environmental dimension - overabstraction, and
conceptual ambiguity. Overabstraction is the result of ignoring the environmental levels, whereas
conceptual ambiguity stems inability to adopt a common definition of munificence. The problem of
overabstraction can be resolved by looking at the environment as comprising of the following five levels:
(granular to highest level): 1) resource pool (stock of critical resources); 2) sub-environment (activities
among individuals); 3) task environment (interaction among organization and its partners); 4)
aggregation environment (constituting interest organizational groups); and 5) macro environment
(general socio-economic patterns). As for addressing conceptual ambiguity, the author proposes three
distinct conceptualizations of munificence, as discussed in the literature: 1) capacity (level of resource
availability); 2) growth/ decline (relative change in capacity); and 3) opportunity/ threat (level to which
the capacity is unexplored).
In a study of how environmental characteristics influence an executive’s pursuit of corporate
entrepreneurship, Zahra (1993) identified two most relevant environmental attributes for innovation and
entrepreneurship as munificence and hostility. Environmental munificence embodies dynamism
(continuity of change), abundance of technology opportunity (availability of demand for new or existing
technology), industry growth, and demand for new products in the environment. The second major source
of variation is environmental hostility, which comprises of unfavorability of change, and competitive
rivalry.

Summary of marquee work on firm’s external environmental

Paper Parameter of interest Environmental dimensions

Dill (1958) Environmental impact on  General environment

managerial autonomy  Task environment

Emery and Trist Degree of complexity and rapidity  Placid, randomized environment
(1965) of change in system-connectedness  Placid, clustered environment
 Distributed-reactive environment
 Turbulent fields

Lawrence and Degree of (un)certainty  Rate of change

Lorsch (1967)  Certainty of information
 Time span of definitive feedback

Thompson (1967) Task environment  Homogeneous-heterogeneous

 Stable-shifting

Child (1972) Uncertainty  Complexity

 Illiberality
 Variability

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Duncan (1972) Perceived uncertainty  Simple-complex (factor used in decision making)
 Static-dynamic (degree of change in factors)

Jurkovich (1974) General characteristics, and General characteristics

movement
 Complexity
 Routineness or non-routineness of problem-
opportunity state
 Presence of organized or unorganized sectors
 Sectors are directly or indirectly related to the
organization
Movement
 Low- High rate of change
 Stable-unstable

Staw and Degree of resource scarcity in  Scarcity- munificence (availability of resources)

Szwajkowski (1975) environment

Miles and Snow Uncertainty  Environmental uncertainty

(1978)

Pfeffer and Salancik Uncertainty  Concentration

(1978)  Munificence
 Interconnectedness

Tung (1979) Perceived uncertainty  Complexity

 Rate of change
 Routineness of problem/ opportunity state

Aldrich (1979) Relevance for environmental  Capacity

selection  Homogeneity- heterogeneity
 Stability- instability
 Concentration- dispersion
 Consensus- dissensus
 Turbulence

Bourgeois (1980) Perceived uncertainty  Objective versus Subjective

 General versus task
 Complexity
 Dynamic- static

Dess and Beard Task environment  Munificence

(1984)  Dynamism
 Complexity

Milliken (1987) Perceived uncertainty  State uncertainty

 Effect uncertainty
 Response uncertainty

Castrogiovanni Munificence  Capacity

(1991)  Growth/ decline

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  Opportunity/ threat

Zahra (1993) Variation in the environment Munificence

 Dynamism
 Abundance of technological opportunities
 Industry growth
 Demand for new products in the environment
Hostility
 Unfavorability of change
 Competitive rivalry

References
Aldrich, H. E. (1979). Organizations and Environments. Englewood Cliffs, NJ: Prentice-Hall.
Bourgeois, L. J. (1980). Strategy and environment: A conceptual integration. Academy of management
review, 5(1), 25-39.
Castrogiovanni, G. J. (1991). Environmental Munihcence; A Theoretical Assessment. Academy of
Management Review, 16(3), 542-565.
Child, J. (1972). Organizational structure, environment and performance: the role of strategic choice.
Sociology, 6(1), 1-22.
Dess, G. G., and Beard, D. W. (1984). Dimensions of organizational task environments. Administrative
science quarterly, 29(1), 52-73.
Dill, W. R. (1958). Environment as an influence on managerial autonomy. Administrative science
quarterly, 2(4), 409-443.
Duncan, R. B. (1972). Characteristics of organizational environments and perceived environmental
uncertainty. Administrative Science Quarterly, 17(3), 313-327.
Emery, F. E., and Trist, E. (1965). The causal texture of organizational environments. Human Relations,
18, 12-32.
Jurkovich, R. (1974). A core typology of organizational environments. Administrative Science Quarterly,
19(3), 380-394.
Lawrence, P. R., and Lorsch, J. W. (1967). Differentiation and integration in complex organizations.
Administrative Science Quarterly, 12(1), 1-47.
Miles, R.E. and Snow, C. (1978). Organizational Strategy, Structure and Process, New York, McGraw
Hill.
Milliken, F. J. (1987). Three types of perceived uncertainty about the environment: State, effect, and
response uncertainty. Academy of Management review, 12(1), 133-143.
Pfeffer, J. and G. R. Salancik (1978). The External Control of Organizations: A Resource Dependence
Perspective. New York, NY, Harper and Row.

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Staw, B. M., and Szwajkowski, E. (1975). The scarcity-munificence component of organizational
environments and the commission of illegal acts. Administrative Science Quarterly, 20(3), 345-354.
Thompson, J. (1967). Organizations in Action: Social Science Bases of Administrative Theory. Classics
in Organization and Management Series. Trans. Publishers.
Tung, R. L. (1979). Dimensions of organizational environments: An exploratory study of their impact on
organization structure. Academy of Management Journal, 22(4), 672-693.
Zahra, S. A. (1993). Environment, corporate entrepreneurship, and financial performance: A taxonomic
approach. Journal of Business Venturing, 8(4), 319-340.

Appendices

Figure 1: Core typology of organizational environments (Jurkovich, 1974)

Figure 2: Relationship between environmental dimensions (Pfeffer and Salancik, 1978)

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Figure 3: Typology of organizational environments (Tung, 1979)

Figure 4: Three view of environment (Bourgeois, 1980)

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