Reinventing the State-Owned Enterprise? Negotiating Change during Profound Environmental Upheaval

This study examines how a small archetypal socialist factory in China transformed into a global leader in power equipment manufacturing. Drawing upon cross-level, longitudinal data from the company’s founding in 1966 to 2016, we unpack a process of organizational change that unfolded during China’s profound transition away from a Soviet-style planned economy. As the relevance of prior experience and organizing templates eroded, the organization faced strong pressures to adopt elements that did not align with its prevailing values. To overcome the challenges and risks of initiating highly controversial and seemingly “immoral” changes, managers relied upon values work – i.e., a category of actions directed at (re)articulating what is normatively right or wrong, good or bad, in the design and operation of an organization. We illuminate three strategies that, in combination, animate this values work: reconditioning, negotiated obsolescence, and mitigating risks of non-conformity. Our model contributes to understanding of how organizations reconcile external pressures for change with internal pressures for continuity and coherence. It also sheds light on how managers counterbalance the risks of diverging from the institutional status quo with strategies to align ongoing changes with shifting conceptualizations of organizational appropriateness – both inside and outside the organization.