International Studies of Management & Organization

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Organizational Identity and Strategy: An Empirical

Study of Organizational Identity's Influence on the
Strategy-Making Process

Annemette L. Kjærgaard

To cite this article: Annemette L. Kjærgaard (2009) Organizational Identity and Strategy: An
Empirical Study of Organizational Identity's Influence on the Strategy-Making Process, International
Studies of Management & Organization, 39:1, 50-69, DOI: 10.2753/IMO0020-8825390103

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50  Kjærgaard (Denmark)

Int. Studies of Mgt. & Org., vol. 39, no. 1, Spring 2009, pp. 50–69.
© 2009 M.E. Sharpe, Inc. All rights reserved.
ISSN 0020–8825 / 2009 $9.50 + 0.00.
DOI 10.2753/IMO0020-8825390103

Annemette L. Kjærgaard

Organizational Identity
and Strategy
An Empirical Study of
Organizational Identity’s Influence on
the Strategy-Making Process

Abstract: Continuous change is important for organizations’ survival in a changing

world, and the need for stability and continuity in the form of a clear and strong
corporate identity is also acknowledged to be critical for organizational success.
Organizations thus face a dilemma when they engage in strategy-making—namely,
how to reconcile the perpetual tension between continuity and change. Provided in
this paper are empirical insights from a longitudinal study of strategy-making that
addresses this critical issue. Taking the perspective of the participants, the findings
explain how their organizational cognition influenced their strategy-making action
and show how a strong organizational identity guided their behavior and made it
difficult for them to adapt to organizational change.

Organizations have to deal with increasingly complex and turbulent environments that
demand that they continuously change and adapt to new circumstances and challenges.
One way for them to cope with these challenges is to manage the strategy-making
process in order to ensure that a continuous stream of new ideas and initiatives create
new opportunities so that the company adapts to new internal and external challenges.
This has been pursued in studies of strategy formation (Mintzberg 1978), strategic
change (Pettigrew 1988), and internal corporate venturing (Burgelman 1983b, 2002)
and is still a central issue in the strategic-management discourse.
However, the need for stability and continuity in the form of a clear and strong

Annemette L. Kjærgaard is an assistant professor at the Department of Informatics, Copen-

hagen Business School, Howitzvej 60, 2000 Frederiksberg, Denmark (tel.: +45 3815 2646;
fax: +45 38152401; e-mail: amk.inf@cbs.dk).
50
 Organizational Identity and Strategy  51

corporate identity is also acknowledged to be critical for organizational success

(Collins and Porras 1994). Organizational identity is assumed to be a key influenc-
ing issue based on organizational cognition, shared beliefs, and individual emotion
affecting the sense-making process of organizational members and, eventually, their
actions. The strategy-making process works to renew the current concept of strategy
(Burgelman 1983a), and continuity through organizational identity works to ensure
consistency in the company’s strategic action. Organizations thus face a dilemma
when they engage in strategy-making, because they must reconcile the perpetual
tension between continuity and change (Burgelman 2002). This challenge is far
from new and has been discussed (e.g., addressing the balance between exploration
and exploitation; March 1991), but it remains one of the major practical challenges
facing organizations today.
Empirical findings in the organizational identity literature confirm a significant
impact of identity on strategy-making, but the strategy literature is less concerned
with the issue of identity (Rughase 2006). However, some empirical studies confirm
the relationship between organizational identity and strategy, for example, the classic
study of homelessness in New York Harbor by Dutton and Dukerich (1991), where
the employees’ organizational identity was shown to influence their perception of
homelessness as a strategic issue that management needed to address. Likewise,
Gioia and Thomas (1996) showed how university employees’ perception of orga-
nizational identity influenced their behavior in the strategic change process, and
Ravasi and Schultz (2006) showed that perceived threats to organizational identity
may lead to renewed strategy-making.
Within the field of managerial and organizational cognition, the topic of
strategic change has been discussed from both a representational/computational
and an interpretive perspective (Lant and Shapira 2001). These perspectives
differ in their focus on portraying mental models (representational) or interac-
tion (interpretive) and have been pursued in two different streams of literature
focusing on what is collectively represented or on common ways of interacting
(Johnson 2009). The first stream provides insight into static snapshots of par-
ticipants’ cognition; the second stream is concerned with dynamic interaction
between participants. Both streams are important in understanding the role
of cognition in strategy-making, but the assumption in this paper is that the
relationship between them, which has hitherto been neglected (Johnson 2009),
will provide important insights.
To relate the two perspectives, the focus of this paper is on exploring how or-
ganizational identity as a relatively stable collective cognitive construct influences
the dynamic process of strategy-making. The following questions are pursued:
What impact does organizational collective cognition have on the strategy-making
process? What is the relationship between members’ individual sense-making and
organizational identity? And what are the consequences of organizational identity’s
influence on members’ strategy-making actions for the ability of the organization
to change?
52  Kjærgaard (Denmark)

The paper draws upon empirical findings from a qualitative longitudinal study
of a strategy-making process. Based on a grounded theory approach, the study is
inductive, developing concepts and categories in the analysis process to construct
theoretical insights on the research topic; therefore, no hypothesis are proposed.
The findings show how participants’ perception of organizational identity at the
operational level is a fairly stable construct influencing their sense-making and
meaning construction and eventually guiding their behavior in the strategy-making
process. The study supports the suggestion that organizational identity is not a
stable set of constructs linked to a set of fixed behaviors, as early work on orga-
nizational identity suggested (see especially Albert and Whetten 1985). However,
the findings also suggest that a strong, successful, and persuasive organizational
identity is difficult to change and continues to guide the behavior of organizational
participants, even though they realize that changes have happened to the organiza-
tion. This contributes to the discussion of strategic inertia (Huff, Huff, and Barr
2000; Mezias, Grinyer, and Guth 2001).
The conclusion from the study is an empirically based argument that successful
organizational identities dominate the cognitive constructs of organizational mem-
bers and guide their behavior, even though they experience a growing dissonance
between their expectations of management’s response to their actions and their
experiences of the latter. Moreover, the empirical findings indicate that participants
make sense of the dissonance by constructing a new reality and, finally, how this
reconstruction of the organizational identity occasions a renewed sense-making
process in which they create new meaning, eventually leading to a change in their
behavior.

Strategy-making

The study adopts an evolutionary approach to the unfolding of the strategy-making

process (Aldrich 1999; Weick 1979), which Burgelman has applied in several of
his works (Burgelman 1983a, 1991, 2002) The evolutionary approach uses three
generic processes to explain how organizational processes emerge and evolve—
namely, the processes of variation, selection, and retention. Burgelman’s framework
of the strategy-making process (1983a) provides an appropriate analytical tool to
explore and analyze the forces and mechanisms that influence the selection of future
strategic actions. It shows how induced (top-down and in line with current strategy)
and autonomous (bottom-up and outside current strategy) strategic processes are
simultaneously in play at all times. They create as well as recreate the company’s
current concept of strategy.
Key to the selection of autonomous strategic action is the participants’ ability to
establish a business case for autonomous strategic actions. Burgelman refers to this
process as “strategic context determination.” It involves the cognitive processes of
reflective learning and political maneuvering, negotiating a new social order (Eden
and Ackermann 1998). The process of establishing the strategic context for autono-
 Organizational Identity and Strategy  53

mous action is influenced by the structural context of the organization. The latter
encompasses a broad range of possible impacts, including organization structure,
strategic planning systems, resource allocation rules, recruitment and promotion
systems, measurement and reward systems, as well as principles guiding behavior
(Burgelman 2002, 99). The structural context is dominated by influence from the
organization’s current concept of strategy and therefore operates to maintain a level
of coherence in the company’s actions (Rughase 2006). It influences the strategy-
making process in a stabilizing way by ensuring a link between the corporate strategy
and the induced strategic action. This study focuses on organizational identity as an
important part of the structural context in which both types of strategy processes
(autonomous and induced) are embedded.

Organizational identity

When I refer to organizational identity, I lean toward the idea that organizations have
identities that influence how individuals interpret issues and take action (Dutton and
Dukerich 1991). The understanding of organizational identity in this paper is based
on an interpretive perspective, arguing that identity is socially constructed and that
organizational participants have a need for some stability of meaning, which leads
them to strive for convergence (Whetten and Godfrey 1998, 35).
According to research into the concept of organizational identity, participants
tend to behave conservatively and find it difficult to adjust to fundamental orga-
nizational change (Brown and Starkey 2004). Within the field of managerial and
organizational cognition, different opinions can be found on the issue of change
and stability. Lindell et al. (1998) mentioned that where, for example, Donaldson
and Lorsch regarded mental structures as unlikely to change and argued that
one function of beliefs is to provide continuity and stability, Weick and Bougon
(1986) and Weick (1979, 1995) viewed mental maps as continuously changing in
accordance with new experiences and thereby emphasized the interplay between
thinking and acting.
Although this paper refers to an organization as having a specific identity and
thereby infers some level of stability, there is a high degree of fluidity and interpreta-
tion connected to the concept. It was suggested that organizational identity is less
stable and enduring than it was previously depicted and that a dimension of fluidity
should be included in the understanding of the concept (Gioia and Thomas 1996).
This explains why organizations do not change in parallel steps of matching new
behavior and new identity but continuously adapt to environmental influences by
reconstructing the meaning of identity without necessarily changing the labels used
to describe this identity (Gioia, Schultz, and Corley 2000). Organizational identity
is thus not separate from the environment but is constantly created and reshaped by
the participants’ interpretations of the environment and their actions on the environ-
ment (Daft and Weick 1984; Milliken 1990; Weick and Bougon 1986).
Where organizational identity is an organizational-level concept, construed re-
54  Kjærgaard (Denmark)

alities (Isabella 1990) are individual or group-level constructs. Construed realities

are participants’ mental perceptions of what to expect and how to behave in the
organization built around a specific situation or set of activities. These realities guide
the attribution of meaning and significance to specific organizational events (Sutton
1987), thereby creating a frame for action. Whereas the organizational identity is
fairly stable, construed realities are continuously constructed and reconstructed
as part of the ongoing sense-making process, and multiple construed realities can
coexist in the organization.

The role of organizational identity in strategy-making

To provide empirical insights into the unfolding of the strategy-making process

during organizational change by exploring the influence of organizational iden-
tity, I draw from the literature on organizational sense-making (Weick 1995). By
focusing on organizational identity as a dimension of the structural context for the
strategy-making process, I expand Burgelman’s framework of strategy-making,
which emphasizes the influence of administrative and structural mechanisms and
only briefly touches upon the effect of cognitive issues on the selection of strategic
action. The empirical findings thus contribute to the understanding of the relation-
ship between collective representation (organizational identity) and collective
interaction (strategic action).

Research setting and methodology

My empirical findings are based on a longitudinal study of an autonomous strategic

process of establishing organizational knowledge management (KM) to integrate
the case company’s headquarters and its downstream value-chain partners. The
KM action was autonomous because no KM project had been defined or put into
action to support the current concept of strategy. I therefore studied some dedicated
employees’ skunk works (work that is not part of a person’s formal work tasks)
rather than well-defined activities. The types of actions and initiatives I looked for
in the study included proposals for new information systems to enable the sharing
and reuse of documents, new procedures for creating and distributing knowledge,
and organizational initiatives to facilitate knowledge exchange (Kjærgaard and
Kautz 2008).
A qualitative research approach was chosen to enable the collection of detailed
in-depth process data. Being inductive, the research approach employed an adapted
version of grounded theory (Glaser and Strauss 1967), referred to by Charmaz
(2000) as constructionist-grounded theory. As opposed to Glaser and Strauss, this
version of grounded theory is based on the assumption that understanding of the
data cannot be neutral and objective but is necessarily constructed by the researcher
in the process of understanding. The study thus adopts a social-constructivist view,
 Organizational Identity and Strategy  55

implying that reality is socially constructed by the observer (Gergen 2001). When
I refer to “reality” in this paper, it is the participants’ perception of reality and not
an objective reality. Accordingly, the role of the participants is understood as active
constructors of meaning as well as active interpreters of reality (Weick 1995). The
participants’ cognitive processes of sense-making and meaning construction are
central and form the basis for understanding the participants’ actions.

Research setting

The research was carried out at a Danish hearing aid provider, Oticon A/S (www.
oticon.com), which is part of the William Demant Foundation and is one of the
world’s leading manufacturers of hearing aids. The company was chosen as the
research setting because of its strong organizational identity. Due to an economic
crisis, Oticon had gone through severe organizational changes in the beginning of
the 1990s. Led by a new chief executive office (CEO) who introduced the vision of
“Think the unthinkable,” the company was trying to reestablish profitability. The
change process included physical relocation into open-space offices with no fixed
workplace for the individual, introduction of a project organization based on the
abolishment of hierarchical organization, and encouragement of the employees to
use their skills creatively (Morsing and Eiberg 1998). Oticon was soon characterized
as an innovative environment (Galbraith 2004; Kanter 1983; Peters and Waterman
1982) enabled by a set of strong values, including the importance of continuous
innovation and change (Morsing and Eiberg 1998). They created a powerful image
in the media, and, most importantly for this paper, the intended development of a
new organizational identity proved to be dominant and persistent.

Data collection and analysis

The empirical data were collected during an 18-month longitudinal field study in
Oticon between February 1999 and July 2000. The primary sources of the data
collection were participant observation, interviews, and written materials.
In the first year of the study, the author spent three days a week at the organiza-
tion, followed by a six-month gradual withdrawal. Eighteen different people were
interviewed multiple times during the field study, which resulted in approximately
50 interviews each lasting from one to four hours. Written materials provided ad-
ditional information about the organization. Corporate communication brochures
showed how the organization presented itself to the environment, and newspaper
articles showed how it was perceived by the environment. Finally, other academic
studies of the organization were available, for example, Lovas and Ghoshal (2000)
and Ravasi and Verona (2001) and Foss (2003).
The analysis of the data followed the strategy of grounded theory (Glaser
and Strauss 1967; Locke 2001) through a four-stage analysis process. First, the
focus was on inspecting texts and naming phenomena by identifying concepts
56  Kjærgaard (Denmark)

Figure 1. A process model of organizational identity in strategy-making (adapted

from Kjærgaard & Kautz 2008)

and discovering their properties, quite similar to what Strauss and Corbin (1998)
referred to as “open coding.” The emerging concepts were then compared to
the empirical data and the phenomena supporting the concept or category were
questioned to ensure analytical robustness. Second, the categories and concepts
were integrated by building a first theoretic skeleton. Third, when the emergent
theory was judged to have plausibility and usefully captured the underlying
complexity of the process, the number of categories was reduced to the most
relevant and robust ones, which were then used to form a narrative of the process.
Fourth, the data were presented in a model to illustrate the role of identity in the
strategy-making process.

A grounded theory model of organizational identity in strategy-

making

The key findings from the study are summarized in the inductively derived process
model (Figure 1). The model operates with two periods in the strategy-making pro-
cess of “creating” and “negotiating,” each of which has a dominant construed reality
as well as a set of cognitive processes that guide the participants’ sense-making.
Furthermore, a triggering event of collision between expectation and experiences
 Organizational Identity and Strategy  57

marks the transition from one process to the other. Although there is no explicit
indicator for time in the model, the change from one stage to the other indicates
that the process unfolds over time.

The two periods in the strategy-making process

Two periods emerged from the analysis of the data—“creating” and “negotiating”
the strategic action.

Creating

In the creating period, different KM activities, events, or ideas were created through
innovation processes or adaptation and adoption of ideas existing outside the
organization. The creations were primarily spurred by personal interest and done
in parallel with other work tasks. As an illustration of what was possible in this
organization, one organization member said:

If you can make do with one or just a few people, then the organization provides
great possibilities for you to start and manage something new—and you are al-
lowed to do it. Interest can be the driver . . . quite a few [projects] are allowed to run
if they have enthusiastic project managers who set the agenda for the project.

Management’s involvement with these member-initiated activities was limited,

and these activities were only sporadically fueled by either human or monetary
resources from the top. The participants described their efforts as “skunk work,”
indicating that this work was not part of their formal work tasks. The creating
period was very unstructured and involved different participants from various or-
ganizational functions. The mood was enthusiastic and the activities were driven
by an urge to “try this out” or “make this happen.”
When asked about the appropriateness of spending time on activities that were
not supported by management, the participants generally stated that being at the
forefront and trying out new ideas was part of their jobs and what had attracted
them to Oticon in the first place.
Moreover, a “hands-off” attitude on behalf of management was part of the
organization’s human-values statement, which emphasized that managers should
endeavor to “set as few regulations as possible” and spend the “least possible
time on control.” These statements were interpreted by the participants as ex-
pressions of slack resources in the organization (Garud and Van de Ven 1992),
which enabled them to explore new opportunities. The participants persevered
in the creating period and kept coming up with new ideas, even in cases where
an idea or activity had not gained support by management at an early stage.
In summary, this period in the strategy-making process was characterized by
optimism and energy.
58  Kjærgaard (Denmark)

Negotiating

In the negotiating period, ideas and activities were shaped into more coherent
proposals by participants who then subjected them to what they imagined to be
a decision-making process in which management would decide which ideas to
support. The participants argued for their proposals and insisted on the value
of their ideas for the organization, but at the same time, uncertainty ruled, and
participants referred to management as being indifferent and not treating the new
ideas seriously.
This has something to do with the attitude that you are allowed to do something.
This is a somewhat peculiar attitude—to be allowed to do something. If you have
written a proposal, or a project plan, or a strategy note, you are allowed to work on
it. This makes it—I don’t know if it is a misunderstood form of communication—
the responsibility of the individual to take it further.
Uncertainty also showed in the lack of consensus about priorities in the strat-
egy-making process. Organization participants referred to this process as “highly
political,” stressing the implicitness of the process and the struggles between par-
ticipants resulting in “internal conflict.” They lamented that management did not
pay attention and took no action.
There are “too many cooks to spoil the broth.” When there is a project meeting,
then a lot of people have to come and “they all have a voice in the matter.” . . .
It makes it unclear who has the competence to make decisions, which makes it
all a bit of a mess.
In summary, the negotiating period was characterized by pessimism, frustration,
and increasing inaction. The majority of the participants involved in the process
gave up the KM action and, in the end, the process came to nothing and fizzled
out. A few activities were still talked about as KM activities, but the envisioned
KM strategy was never implemented. Table 1 provides empirical examples of the
dominant attitude about action in the two periods.

Changing cognitive frames of reference

Figure 1 shows how participants made sense of their experiences in the two peri-
ods of “creating” and “negotiating” by drawing from different construed realities.
Moreover, it shows how their perception of a collision between expectations and
experiences brought about the change from one dominant construed reality to the
other.

Thinking spaghetti

The initially dominant construed reality of “thinking spaghetti” was based on the
results of the metamorphosis of the company in the early 1990s, as mentioned earlier.
 Organizational Identity and Strategy  59

Table 1
Characteristics of the two periods in the strategy-making process

Creating Negotiating

Characteristics of the Skunk work Seeking decision making

process Do it yourself Seeking consensus
Finding interested people Conflict
Perseverance Uncertainty
Inspiration from competition Power and politics
Proposing new initiatives More talk than action
Values and identity Resource allocation
Enthusiasm and drive Lack of understanding
Confusion about the conceptSearching for supporters
of knowledge management Discussing
Different perceptions Arguing
Insistence
Selling the idea
Aligning interests
Giving up

The label of “spaghetti” was created and used by the participants as a metaphor for
the apparent chaos and continuous change that characterized the new organization,
on the one hand, and the ability for the employees to pursue a specific interest of
their own choice, on the other.
The new organization was heavily promoted in the media that fed the story back
to organizational participants and thus reinforced their sense of being in a special
or unique organization. Morsing (1999) referred to this process as the “media boo-
merang.” The interaction created a strong organizational identity that was identified
by participants as “thinking spaghetti.” This image was dominant at the beginning
of the strategy-making process studied.
Drawing from the grounded analysis of the process, the spaghetti identity was
expressed in the participants’ descriptions of the organizational characteristics as
“informal,” “unstructured,” “chaotic,” and “trusting.” The participants described
themselves as “talented” and “committed,” as having “skills of networking” and
being “able to maneuver politically,” being “self-promoting,” “determined,” and
“courageous.” Moreover, they described the organization’s external image as
“strong” and “front-running” and the organization’s self-image as being “unique”
and “different.”
Oticon has a very individualistic culture. You have the opportunity to do what
you want to do, but you have to fight for it. . . . And some people give up because
they do not have the energy to fight for their interests.
Although these findings initially showed a strong identity closely linked to the
60  Kjærgaard (Denmark)

spaghetti organization and supported by the rhetoric in corporate communication,

this construed identity was increasingly questioned during the field study. There
was a growing dissonance between participants’ expectations and their experi-
ences, which eventually made the participants question their own projection of
the organizational identity and finally to reconstruct that identity. This resulted
in a new construed reality that was labeled “living lasagna” in the analysis. The
participants referred to the organization using this metaphor to connote a change
in the organization from being rather chaotic to becoming more structured, hence
referring to lasagna as opposed to spaghetti.

Living lasagna

Whereas participants had stressed the importance of visions and reflectivity in

“thinking spaghetti,” they now pointed to a new attitude of management that
repudiated former values and instead promoted a more solution-oriented culture,
emphasizing products and product development rather than public relations and
marketing. According to the participants, organizational change was also reflected
in management’s disinterest in public relations activities, which meant a decline
in current press coverage:
The lights have been switched off and have been so for the past two years. You will
only find William Demant if you care to read the share prices; and you will only know
that Oticon is part of William Demant if you take the trouble to order the annual report
or go on the internet. That is the level of communication that has been chosen.
The participants I talked with and observed experienced the organizational
changes as disruptions in their expectations of how management “was supposed
to act.” They expressed this experience by comparing “old” versus “new” organi-
zational values. Whereas they expected the organization to continuously change,
management expressed a need for stability. Where they expected management to
be visionary and facilitate a culture of “high ceilings,” they were encouraged to
concentrate on good workmanship and leave the thinking behind, which the CEO
emphasized by the phrase “This is not a university.” When participants proposed
new ideas or took new initiatives, they did not experience openness to a discussion
of these issues but felt aloofness.
The construed reality of “living lasagna” emerged as a result of the participants’
attempt to make sense and create meaning of the dissonance they experienced when
their expectations of management’s response to their strategic initiatives were not
met. The differences between the two construed realities are shown in Table 2.

Collision

The shift from “creating” to “negotiating” was triggered by a collision between the
participants’ expectations and experiences that changed their attitude toward action
 Organizational Identity and Strategy  61

Table 2
Characteristics of the two construed realities in the strategy-making
process

Construed reality Thinking spaghetti Living lasagna

Characteristics Image ↔ Results
PR ↔ Product development
Creativity ↔ Good workmanship
Spaghetti ↔ Lasagna
Change ↔ Stability
Tearing down walls ↔ Building walls
Management attention ↔ Management indifference
Rhetoric ↔ Action

as well as their interpretations of management’s inaction. For a time, their attitude

to action was characterized by persistence in the creating process, but that attitude
gradually changed to renouncement as a consequence of the growing dissonance
between expectations and experiences. This change was highly linked to changes
in the participants’ interpretation of the inaction of management which changed
during the study from being a facilitator for the participants’ actions in the creating
process to becoming an inhibitor in the negotiating process. This is an example of
the driving need for humans to make sense of their world in order to act within it
(Kelly 1955; Weick 1995).
Although structural aspects of the original spaghetti organization still existed
at the time of the field study, they had undergone change and existed on a reduced
scale. The changes were not inconsiderable, from the researcher’s point of view, but
they had not altered the participants’ perception about the organizational identity at
the beginning of the study. Some structural changes were mentioned by the partici-
pants, but more as curiosities than as triggers of a more fundamental reconsidera-
tion of activities. As the fieldwork progressed, the participants gradually changed
this perception, which was expressed by an increasing number of examples and
stories told about discrepancies between the image of the organization and what the
participants actually experienced. The stories were part of a renewed sense-making
process to create meaning of the discrepancies they experienced.
Eventually, the participants’ sense-making process led to a reinterpretation of
managerial inaction which previously (in the creating process) had been interpreted
as facilitating strategic activities. Instead of seeing inactivity as a positive hands-off
gesture, the participants now interpreted it as rejection, a disinterest in their ideas
and a message for them to stop their contributions.
Accordingly, the new construed reality of “living lasagna” came into being as a
perception based on the process of contrasting the participants’ expectations of the
spaghetti organization with more recent experiences. What is particularly notewor-
thy in the construction of the new construed reality is that it did not replace “thinking
62  Kjærgaard (Denmark)

spaghetti,” which was the case, for example, in the case study reported by Isabella
(1990), where managers in the process of interpreting a change process drew from
a different construed reality at each stage of the process. In the strategy-making
process at Oticon, the two construed realities instead coexisted for a time and thus
created a situation where the participants had to cope with multiple realities.

Discussion: The relationship between organizational identity and

strategic action

During the year and a half field study at Oticon reported in this paper, “thinking
spaghetti” clearly dominated the behavior of organizational participants. Their ac-
tions in the first period of the strategy-making process reflected their perception of
their organization as creative, front-running, and daring, which they enacted in their
persistent creation of new strategic initiatives. The construed reality of “thinking
spaghetti” was so strong that they did not hesitate in generating new initiatives,
although they did not see themselves as receiving support from management. Only
over time, when the support still did not come as expected, did they change their
behavior.
In contrast to the behavior in the first period of the study, the behavior in the
second part of the process was not guided in the same way. “Living lasagna” was
not as uniformly perceived as “thinking spaghetti.” The higher level of ambiguity
and uncertainty instigated a crisis in the participants’ feeling of loyalty toward the
organization. The employees were faced with a dilemma: should they adapt their
actions and thereby contribute to a new identity, or should they hold on to the
identity of “thinking spaghetti?” The old-timers had been keen ambassadors of the
spaghetti organization, praising Oticon in the media and commending it to the many
visitors it hosted. The newcomers had been attracted to the spaghetti organization’s
external image, and some people had even waited years for a suitable position to
be vacant. Self-evidently, they were not keen to accept that the organization was
not what they had expected.
These reactions support the growing understanding of the conjoined existence of
cognition and emotion in the cognitive perspective on strategy (Johnson 2008), as
the participants recognized that changes had taken place and they had accordingly
constructed a new dominant construed reality. Emotionally, however, they still clung
to the spaghetti organization, which many of them had participated in building. A
few of them openly resisted the changes being made, declaring that they did not
like the way management downplayed the spaghetti organization.
Equally important to the participants’ persistence in “thinking spaghetti” was
their perception of management’s inaction. Management was not seen as encour-
aging the participants to reconsider the organizational identity nor to make an
effort to construct a new organizational identity. Put differently, the participants
did not experience encouragement to change their perception about the organiza-
tion. This situation makes two issues stand out from the study as important in
 Organizational Identity and Strategy  63

Figure 2. Creating a self-fulfilling prophecy

understanding organizational identity’s influence on the strategy-making process:

(1) the participants’ persistence in “thinking spaghetti” and (2) their interpretation
of management’s inaction.

How beliefs drive action persistence

The participants’ commitment to creating new strategic action can be understood as

action based on belief-driven sense-making (Weick 1995). To explore this proposi-
tion in more detail, I focus on the first period in the strategy-making process.
This period can be interpreted as constituting a self-fulfilling prophecy (Weick
1995) that resulted in the participants’ persistence in creating new strategic actions
although their initiatives and actions were not supported by management.
According to Weick (1995), people will try to create some sort of stability and
predictability when they engage in ambiguous tasks or when they face instability.
The strategy-making process can be interpreted as such an ambiguous task for at
least two reasons. First, it was dominated by autonomous strategic initiatives so
that no formal objectives, plans, or expectations existed. Second, the organization’s
identity encompassed “creative chaos” and valued flexibility, creative ideas, as well
as a lack of formal procedures.
This strong organizational identity created stability and guided the participants’
actions. The participants’ noticing (B) was therefore guided by “thinking spaghetti”
(A), and they saw the organization as a realization of spaghetti thinking. Based on
64  Kjærgaard (Denmark)

this bracketed reality, they interpreted (C) the values of the organization (and man-
agement) as supporting creativity and courage. They enacted (D) this interpretation
by being creative, coming up with new ideas, thus reaffirming “thinking spaghetti”
(A) and, accordingly, their commitment to similar action in the future.
The participants ignored management’s inaction as they saw themselves as
frontrunners, daring individualists ready to fight for their ideas that, again, reflected
the organizational identity. Furthermore, they did not create a formal proposition
for spending time generating strategic actions, and they did not ask permission
from anyone as they expected chaos and taking initiatives on their own as being
in line with “thinking spaghetti.” They then evaluated the results of the creation
process against the presumptions of “thinking spaghetti,” and their behavior was
confirmed by the presumptions that they had constructed themselves. This “think-
ing in circles” resulted in the escalation of the participants’ commitment to action
and created a self-fulfilling prophecy.

How participants interpret management’s inaction

The inaction of management, as perceived by the participants, added to their es-

calating commitment to the creation of new strategic initiatives. As the company’s
vision and mission statement remained the same and management did not actively
promote a new organizational identity to replace ‘“thinking spaghetti,” it took some
time before the participants engaged in a new process of sense-making. However, in
time, they made sense of management’s inaction by constructing a new perception
of the organization which was in opposition to “thinking spaghetti.”
“Living lasagna” was accordingly a construction based on participants’ percep-
tion of what had changed in the organization. This construction was different from
the construed reality of “thinking spaghetti” which was based on the vision and
promotion of the organization by the former management who took an active role in
the construction of the spaghetti organization. As described by various participants
or observers of the organization in Morsing and Eiberg (1998), all management,
particularly the CEO, played a significant role in designing, promoting, implement-
ing, and sustaining what became the myth of the spaghetti organization. During
the field study, it became clear that the new management (led by a new CEO) did
not intend to play an equally proactive role in the creation of a new organizational
identity. In contrast to earlier times, the participants felt that it was very difficult
for them to receive clarification of management’s thoughts and plans for the future
regarding anything other than product-related issues, in which case management
was very informative and proactive.
As no new story about the organization was told—at least not a coherent and
convincing one—the myth of the spaghetti organization persisted alongside the
new construed reality of “living lasagna,” and some participants ignored the signs
of change.
 Organizational Identity and Strategy  65

Figure 3. Four different ways of making sense of “reality”

How ambiguity creates a broader range of behavior

The more diffuse organizational identity that the participants construed in the sec-
ond period of the strategy-making process did not guide their sense-making and
meaning-construction as narrowly as the first construal. The consequence of this
situation was a more ambiguous perception of the organizational reality among the
participants, governed by whether or not they accepted the new organizational iden-
tity based on “thinking spaghetti” and whether they chose to continue to create new
strategic initiatives or let them go. The empirical findings show four different ways
of making sense of the organizational reality, which are displayed in Figure 3.
Adapting in this situation refers to the observation that some organizational
participants continued to propose new strategic actions even though they accepted
that the organization’s identity was changing. They made sense of the dissonance
between expectations and experiences by reconceptualizing strategic action to fit
the new construed reality of “living lasagna.” By creating new initiatives that bet-
ter fitted the current concept of strategy, the participants made them more easily
acceptable for management to support. The outcome became, in other words, less
autonomous and more induced.
Adhering happened when some participants continued to propose new strategic
actions but did not recognize a new reality. They ignored the discrepancies they
66  Kjærgaard (Denmark)

experienced and based their sense-making on the expectations they had at the be-
ginning of the process to justify continuous suggestions for strategic action. These
participants made a difficult case for themselves in the organization, and eventually
some of the key actors left the company to “pursue their interests elsewhere.”
Ignoring occurred when participants did not accept that “reality” had changed
and continued to propose strategic initiatives as before. Unlike those who were
“adhering” to the old ways of doing things, however, these participants made sense
of their lack of success by blaming themselves that the strategic initiatives they
had suggested were not good enough for management to embrace. The process of
ignoring should be viewed as a group-level phenomenon as new participants also
ignored the results of previous participants’ attempts and failures. This process
resembles a failure trap (Levinthal and March 1993), where exploration is in focus
and where new ideas and technologies fail and are replaced by other new ideas and
technologies which fail in turn (1993, 106).
A final process of abandoning happened when participants made sense of the
dissonance they experienced by giving up the attempt to develop strategic actions.
These participants realized that their proposals “did not fit into this organization
that [we have] become.” By abandoning the activity, participants accepted that
“reality has changed” and that the ideas they proposed did not fit this new reality.
On this basis, their old activities “just slowly disappeared and nobody talks about
[them] anymore.”
This description of the four different ways of making sense of reality in the
second period of the strategy-making process clearly shows that the participants
were much more ambiguous in their meaning construction, when compared to their
earlier activity that led to a different and broader range of behavior.

Conclusions and implications

The study explored how organizational identity influenced participants’ strategy-

making actions. Although past identity research documented the impact of orga-
nizational identity on strategy, findings from this study highlight the influence of
a strong organizational identity as enabling as well as prohibiting organizational
change.
Based on the empirical findings from this study, I have argued how organizational
identity as a collective cognitive construct influences the sense-making and meaning
construction of organizational participants involved in strategy-making. The find-
ings show that there is a strong relationship between the participants’ perception of
organizational identity and their sense-making and meaning construction.
The findings point to participants’ collective cognitive frames of reference as
influencing their individual sense-making based on beliefs about the organization.
This again influences their actions that are guided by the collective cognition, and in
the case of a strong collective cognition this can lead to the creation of self-fulfilling
prophecies. Further, the findings highlight how changing cognitive frames cause
 Organizational Identity and Strategy  67

ambiguity, creating a broader variety in participants’ actions.

In conclusion the empirical findings support the suggestion that organizational
identity has a significant impact on strategy-making as also shown in previous
research (see Dutton and Dukerich, 2001; Dutton, Dukerich, and Harquail 1994;
Gioia and Thomas 1996; Rughase 2006). While companies may strive to construct
as strong and enduring identities as possible, they might end up getting trapped
by their own success when the organizational identity becomes a challenge to
organizational change.
I hope to have spurred further research interest into studying the relationship
between organizational identity and strategy-making and will conclude by outlin-
ing two issues that have emerged from this study but have not been sufficiently
explored. The first issue is the role of emotion in construction and reconstruction
of organizational identity. Although emotion was not the focus of research in this
study, the findings show that organizational participants were emotionally attached
to the organizational identity of “thinking spaghetti,” which affected their sense-
making processes and their actions. More research in this area would be valuable.
A second issue is the role of management as mediating organizational cognition
and action, and it would be interesting to explore to what extent management can
encourage identity change and what impact managerial silence has on the process
of changing organizational identity.

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