Organizational Culture as an Analytical Perspective on ‘Organizational Failure’

Abstract

Under the knowledge-based economy, the new public management demands that the university as a source of wealth and well-being functions as an ‘organization’. However, university reform has not functioned smoothly, and a situation of hybridisation has emerged, where heterogeneous ideologies of managerialism and collegiality coexist. Oliver Williamson states that ‘the organizational failures’ result when bounded rationality and opportunism, which are human nature, combine with environmental factors. And the current situation of hybridisation suggests the importance of focusing on the organizational culture that defines the mindset of organizational members. This paper proposes the ‘organizational paradigm’ as an analytical framework that integrates the thinking and behavioural styles of university members into the typology of organizational culture based on the Competing Values Framework by Cameron et al. and refers to the importance of organizational culture in university organizational reform through verification with the author’s findings of quantitative analysis in Japanese universities.

1. Introduction

The development of the knowledge-based economy is forcing a major shift in the organizational model of universities. As a unique, ‘loosely coupled’ organization, the interest that was directed towards the internal structure of the organization now shifts to a ‘holistic model’ as the relationship between universities and industry and the business community deepens [1]. In the state–university relationship, as well, the focus has been shifted from regulation of procedures to outcomes and results, a context of deregulation with an emphasis on the measurement of results. Underlying this change is the ideology of managerialism, which sees the public sector as something to be ‘managed’ and seeks to fulfil its responsibilities to its customers—consumers and taxpayers—through streamlined and standardised procedures [2]. The New Public Management (NPM) as the instrument of neoliberal policy is embodied by managerialism (see above); on the other hand, NPM has diverse objectives, such as strengthening the devolution of authority to local institutions by reducing the powers of central government [3], reducing state expenditure by promoting public sector organizational reform [4] and promoting the transition from bureaucratic to entrepreneurial organizations [5], so the concept is not clear [6]. However, the essence of NPM includes a desire to strengthen hierarchies based on direct control relationships or indirect governance based on strong contractual relationships between principal–agents [7], and university governance is becoming increasingly centralised in the trend of university reform [8].

Thus, as the organizational model of the university undergoes transformation, there is an emerging hybridisation within higher education institutions between the demands of modern management and traditional academic norms [9]. Milgrom and Roberts [10] point out that while the value maximisation criterion is presented as a condition for an organization to act as if it were an individual, universities are especially difficult to apply this criterion. In other words, the lack of value to be maximised is behind the emergence of hybridisation. Kezar and Lester [11] and Bess and Dee [12] point to the importance of focusing on the values when examining the organizational behaviour of universities.

The problems caused by hybridisation are not limited to the inner workings of university organizations. Global warming, biodiversity loss, pandemics and economic migration are compounding the human–environment system, and their solution requires not only interdisciplinary research but also transdisciplinary research involving multiple actors, such as policymakers and industry. University and research institutes play a central role in transdisciplinary research [13], but the promotion of collaborative research between different stakeholders is confronted with the same problems of the value maximisation as within the organization itself. The change to a holistic model due to the development of a knowledge-based economy has produced an environment of the organizational failures [14], which is different from the world of frictionless ideal [14], both inside and outside universities. The problem of hybridisation in university can be seen as a prototype of such a problem. However, no analytical framework has been established to systematically understand this problem, and an analytical perspective is required to address the organizational failures caused by differences in values.

This paper aims to study an analytical framework for examining the organizational failures, focusing on organizational culture, which is a representation of members’ perceptions, and on universities, where maximising value is considered particularly difficult.

In conducting the above objectives, this paper is structured into six sections, including this section. Section 2 reviews previous research focusing on organizational culture in university along two trends in organizational culture research: interest in the cultural forms of organizational culture and interest in its impact on outcomes. On the one hand, in a knowledge-based economy, universities are required to be responsible for adapting to the external environment based on the transformation of values and ideologies, and in order to construct the analytical framework on ‘organizational failure’ that this paper aims at, it is necessary to assume a series of mechanisms: friction with neoliberal ideologies and dysfunctional environmental adaptation caused by this friction. This requires an integrative perspective on the two trends in organizational culture studies, but we will confirm that there is no previous research based on such an integrative perspective.

After reviewing the achievements of previous studies, this paper develops an argument for the integration of the two trends mentioned above. Section 3 deals with the issue of value as the basis of cultural forms, discusses the transformation of the research system under a knowledge-based economy, then refers to the subjective right ‘academic freedom’ and confirms that university reform is closely related to the issue of value. The frictions within university brought about by university reform are then identified as intergroup conflict within organization [15], and a premise is laid down for Section 5, which discusses ‘organizational failures’. In the following Section 4, the concept of ‘organizational paradigm’ is introduced in joining the values discussed in Section 3 and their superstructure, organizational culture. It then focuses on the heterogeneity of the organizational paradigm as a source of hybridisation and presents the ‘organizational paradigm analysis framework’, which is typified into four categories based on previous research.

After organising the cultural forms, the first trend in organizational culture studies, the following Section 5 presents a second ‘organizational failure framework’ specific to university, which integrates the organizational paradigms discussed in the previous section, as a framework for analysing why organizational failures occur in university and the mechanisms by which they occur. This framework focuses on the mechanisms between organizational outcomes and organizational culture which is the second trend in organizational culture research, and the two trends are integrated in this section.

In this framework, the discussion is developed in three stages, based on problematic concerns in transaction cost theory. In the first stage, based on previous research, the basic concept of a framework for organizational failure based on transaction cost theory is presented. In the next stage, followed by the leader–follower relationship which can be regarded as a ‘principal–agent’ relationship, is regarded as a ‘transaction’ in light of the hybridisation problems currently occurring in university. Furthermore, reflecting the characteristics of university characterised by subcultural diversity, the stakeholder theory, which aims to establish relationships between stakeholders with different values, and the ‘organizational paradigm analysis framework’ developed in the previous section are used as support in the final stage. This section presents an ‘organizational failure framework’ specific to university, which sees leader–follower relationships with different organizational paradigms as ‘transactions’.

The final section, Section 6, summarises the study and makes reference to its significance and limitations, as well as to its prospects and implications for future research.

2. Survey of previous research

Kitai [16] states that there are two trends in organizational culture research: interest in cultural forms, which are ‘expressive aspects that transmit ideologies and values’, and interest in the impact on outcomes, which focuses on ‘the technical and tool aspects of the organization’, but a similar trend can be observed in studies of organizational culture of university. Representative studies of the former type include Clark [17], who focused on the function of ‘myths’ in integrating the boundaries between departments within a university organization and between inside and outside the organization, and Becher [18], who raised doubts about the uniformity found in market-based institutions and revealed the diversity of academic culture as a disciplinary community. Subcultural diversity is an organizational characteristic of universities, and De Zilwa [19] found that subcultures and values differ between groups according to their proactivity to adapt to the external environment, while Sporn [20], who examined subcultures in the Vienna University of Economics, found the similar facts. In addition to these subcultures between disciplines, another problematic issue with regard to the integration of organizational goals is the difference in subcultures between faculty and staff, which is also related to the hybridisation on which this paper focuses. Swenk [21] identified a lack of recognition of contradictions between faculty and staff as a cause of conflict between them; Kuo [22] points out that conflicts between faculty and staff are more complex than in other organizations due to the existence of an organizational culture based on their academic nature.

As for the latter regarding the ‘technical and tool aspects of the organization’ that organizational culture provides, Cameron and Freeman [23], who examined the relationship between nine organizational outcomes and the congruence, strength and type of organizational culture, and Smart and John [24], who conducted a follow-up study of the same, are representative quantitative studies.

Representative qualitative studies of universities that refer to the instrumental functions of organizational culture include Tierney [25], who defined them by several sub-concepts such as leadership, trust, strategy and mission, and Kezar [26], who also noted that in universities, leadership, relationships and trust are more important than rules and procedures. Barkin and Collins [27] also point out that Audit Culture, based on neoliberal ideology, has led to a diversification of indicators for measuring educational outcomes in the field of international education. This has led to a situation referred to as ‘rubric shopping’, whereby convenient indicators are selected according to different educational objectives.

The above-mentioned previous studies were conducted in Europe and the USA, but hybridisation is also taking place in East Asia. Chan, Yang and Wai Lo [28] reveal the fact that there is a cultural clash with Chinese state control in university in Taiwan, where neoliberal ideals in the West are prevalent. In Japan, where the author has been studying organizational culture, university reforms have progressed, starting with the incorporation of national and public universities in 2004, but the incorporation of national universities, which was the main focus of reform, was a ‘peculiar system’ [29] in which authority was significantly more concentrated in the hands of university presidents than in other countries. Furthermore, since the 2010s, ‘selection and concentration’ in the strengthening of management systems and allocation of funds has progressed throughout the entire higher education sector, including private universities, but it is difficult to say that the university reform has been successful. In this context, an increasing number of studies have focused on organizational culture, but only a limited number of studies have focused on the types of organizational culture that are critically important for examining the situation of hybridisation. First, a previous study focusing on organizational values and ideologies [30] examined the characteristics of the organizational culture of national, private and public universities established by local governments, using the CVF scale. While in Japan, national universities have a particularly high prestige as research-oriented universities, private universities have university management in line with their founding principles, and public universities are strongly controlled by local governments; the results in this study showed that above characteristics in each founder.

Similarly, Maeda [31] focused on the instrumental aspects of organizational culture using the CVF scale. This study conducted a quantitative study using a multilevel model on faculty members at a private universities and revealed the mechanisms that generate and suppress conflict as a factor of opportunistic behaviour and revealed the fact that an organizational culture that emphasises research reduces conflict, while an organizational culture that emphasises competition between universities and centralisation of power in the university executive reinforces conflict.

In addition, in order to clarify the degree to which organizations are able to prevent opportunity-based behaviour, it is necessary to focus on efficiency rather than on organizational effectiveness, which focuses on attainment. A review article focusing on efficiency in educational institutions is De Witte and López-Torres [32], but there are no previous studies internationally that have used CVF to identify the relationship between organizational culture and efficiency, such as Cameron and Freeman [23], mentioned above, and Smart and John [24] who have focused on organizational outcomes rather than on efficiency. Thus, the relationship between organizational culture and efficiency has not been clarified, but Maeda [33] examines two types of efficiency, short-term resource allocation and long-term management improvement performance, for private universities using the data envelopment analysis to identify private universities with high management capacity and suggests that a highly competition-oriented organizational culture has a strong influence on organizational efficiency.

In a knowledge-based economy, where responses to the external environment are required, a framework that integrates the relationship between cultural forms and performance is currently sought, but as noted above, previous studies focusing on organizational culture have found two separate trends. There is a lack of previous research focusing on a framework that integrates the two interests.

3. Knowledge-based economy and academic freedom

Unlike classical economics, which rejects state intervention in individual freedom, neoliberalism actively evaluates the role of the state as far as it concerns appropriate market development, and the main feature of its ideology is that it regards knowledge as capital [34]. The higher education sector is undergoing a transformation at all levels—political, economic and philosophical—and the transformation of the organizational model towards a ‘holistic model’ [1] of the university must be understood in this context. It is also a transformation from a ‘public good knowledge/learning regime’ to an ‘academic capitalist knowledge/learning regime’ [35]. Marginson [36] points out that as long as NPM, the policy instrument of neoliberalism, exercises power based on ‘freedom as control’, the ‘freedom as power’ described by Amartya Sen is necessary as a corresponding force to that power. In other words, the heterogeneity of values surrounding ‘freedom’—‘freedom as control’ on the part of administrators, who pursue organizational values and rely on legitimacy based on laws and regulations, and ‘academic freedom’, which is also a self-subjective right on the part of faculty—exists, while power-based enforcement against heterogeneous values is intensifying, The essential challenge of hybridisation in universities in a knowledge-based economy can be said to lie in such a situation. Currently, in university, the management of objectives, such as setting organizational goals, strategic planning and effective resource allocation, has become increasingly important [4], and a situation has arisen where the management of objectives has itself become an end in itself. Kogan [37] points to this ideology, in which ends and means are inverted, as ‘managerialism’ and distinguishes it from management. Birnbaum [38] also points out that ‘governance’ is a concept that describes organizational structures and procedures to achieve an ‘effective balance’ under different systems based on different validities, but a distinction between governance and managerialism should also be made.

March and Simon [15] identified three types of origins of ‘intergroup conflict within organization’: a difference in goals, a difference in perceptions of realty and a positive felt need for joint decision-making. Also, there are stages in the methods of resolving these conflicts. The methods of conflict resolution at the individual level include persuasion and problem-solving, but when the conflict cannot be resolved between members, the level of the problem shifts to the organizational dimension. This solution then becomes ‘bargaining’ and ‘politics’ [12, 15], but these problem-solving methods are difficult to apply between members who have different perceptions on the value dimensions of goals and perceptions of realty. Bess and Dee [12] state that it is important that administrators and faculty members in universities do not aim to follow the same conceptual framework, but rather work together to transcend the conceptual frameworks attributed to their respective positions and to find a shared commitment. They point to the importance of Appreciative Inquiry as a solution method, which is a ‘communication technique’, allowing for conflict between groups and attempting to overcome the factors causing that conflict through dialogue. Lu [39] refers to the importance of members with different values exploring shared values through examples of practice in US universities and states that ‘institutional restraint’ is more important than ‘institutional neutrality’ in this practice.

The increasing hybridisation that value differences bring about is not only limited to within universities but also between university and business organizations. Geiger [40] states that while the knowledge-based economy is advancing, the culture between academic and industrial research is fundamentally different, with industrial research tending towards application and disclosure, whereas universities have a different interest: the advancement and diffusion of systematic knowledge. Difficulties exist in industry–academia collaboration in the form of differing values, with companies expecting university researchers to contribute to the task and universities expecting companies to contribute to research funding and student support. In overcoming inter-sectoral conflicts based on cultural differences, efforts are required to search for a compromise between the two sides through negotiations.

The shift to a ‘holistic model’ based on the development of a knowledge-based economy has led to hybridisation, where heterogeneous values coexist inside and outside university, resulting in inter-group conflicts within organization and inter-organizational conflicts caused by value differences.

4. Organizational paradigm analysis framework

4.1 Organizational paradigm

The previous section referred to a situation in which a hybridisation of ‘freedom as control’ by government and university administrators and ‘academic freedom’ in university faculty members has emerged. The above situation is closely related to the issue of bounded rationality brought about by their values. In this section, the concept of organizational paradigm will be introduced to systematically combine values and organizational culture as sources of bounded rationality and to position organizational culture as an analytical perspective of organizational failure.

Transaction cost theory, which is the theoretical basis for the mechanism of ‘the organizational failures’, incorporates concepts related to organizational culture, such as ‘atmosphere’, which enables ‘supplying a satisfying exchange relation’ [14]. Milgrom and Roberts [10] also stated that ‘implicit contracts’, which are closely related to corporate culture, correspond to a shared set of values, ways of thinking and beliefs and serve ‘An important adjunct to incomplete written contract’. Focusing on organizational culture as a factor in the forming of bounded rationality at the organizational level, not only among individual members, is useful in examining the organizational failures in universities, which encompasses intergroup conflict within organizations due to differences in values.

On the other hand, the concept of organizational culture is multivalent, Schein [41] identified the elements of organizational culture as ‘articfacts’, ‘espoused beliefs and values’ and ‘underlying assumptions’. Tierney [25] who noted ‘organizational culture is as slippery a term as the word culture’ pointed out the elements of organizational culture generally agreed upon by organizational culture researchers as ‘environment’, ‘mission’, ‘socialisation’, ‘information’, ‘strategy’ and ‘leadership’. However, in all of these, the concepts of values and mission are included in the elements of organizational culture. Another term that has the same meaning as values and worldviews is paradigm. Bess and Dee [12] point out that ‘underlying assumptions’, which Schein [41] defines as part of organizational culture, are most closely related to the concept of paradigm. Thomas Kuhn used the term paradigm to examine the history of the development of science, which Kuhn defined as meaning ‘universally recognized scientific achievements that for a time provide model problems and solutions to a community of practitioners’ [42]. The concept of paradigms has also been the focus of attention in organizational theory, but Kagono [43] criticised that ‘what has been called a paradigm in previous discussions can be adequately substituted by the concept of a common worldview or organizational ideology’ and that ‘the inherent implication of the concept is developmental’ and proposed the concept of organizational paradigm, which defines the thinking and behavioural patterns of organizational members.

Kagono [43] explains that the organizational paradigm consists of three elements and defines a metaphor as an assumption of thinking that is unquestionably accepted by the members as legitimate within organization members. And the metaphor itself is composed of the following subcomponents.

‘The members of a company themselves share a variety of metaphors about the company, about the relationship between the company and the market, and about the relationship between the company and its members’ [43].

The second and third components of the metaphor’s upper structure are then explained as follows.

‘The second is the paradigm as values and norms that more concretely indicate how members of an organization should behave in different situations. It is the level corresponding to what we have called the daily theory and is a similar expression to which we have called organizational culture in organizational theory. Finally, it is an exemplar or example that concretely represents the daily theory’ [43].

Organizational paradigm have robustness and can lead to a decline in the organization’s adaptability to its environment. Hence, for an organization to survive in the long term, it must undergo a paradigm shift [43]. Milgrom and Roberts [10] describe the difficulties of making changes in corporate culture, which are closely related to implicit contracts, as being equivalent to ‘breaking old contracts and implementing new ones, all without the benefit of being able to discuss the terms of either contract very explicitly’. In the light of this point, it will be understood that organizational paradigm and implicit contract are synonymous concepts. The current situation in university can be described as the coexistence of two types of contract between administrators and faculty members based on different values that have not been discussed on both sides. The above-mentioned appreciative inquiry [12], which creates a new contract, may be one solution to this situation.

4.2 Typology of organizational paradigm

In this section, the concept of organizational paradigm is used to attempt a typology of the values of university members and the organizational culture that arises from them. The ‘organizational paradigm analysis framework’ based on the above typologies will be presented as a frame of reference for understanding why organizational failure occurs in universities. In examining this analytical framework, reference is made to the university typologies of Olsen [44] and McNay [45], who formulated a typology of universities in terms of adaptability to the society surrounding the university. Furthermore, the ‘Competing Values Framework’ (CVF) [46] is additionally taken into account in making the connection with the organizational culture arising from the values of the members. Considering the consistency between the concepts in these previous studies, an attempt is made to integrate them into the ‘organizational paradigm analysis framework’.

First, Olsen [44] in Table 1 (p. 30: hereafter ‘Olsen Table 1’) describes four types of university and governance based on the two dimensions of autonomy and conflict: a rule-governed community of scholars, a representative democracy, an instrument for national political agendas and a service enterprise embedded in competitive markets. In terms of the low autonomy typology, low conflict is a ‘rule-governed community of scholars’ based on traditional value norms, while high conflict is a ‘representative democracy’ based on the participation of diverse members. The low conflict in the high autonomy typology is an ‘instrument for national political agendas’ that acts as an administrative organization, while the last high autonomy–high conflict is a ‘service enterprise embedded in competitive markets’. The ‘community of scholars’, which is based on academic values, is classified as an ‘institution’, while the other types of ‘representative democracy’ are an ‘instrument’ for individuals and groups within the university to realise democracy, while the ‘national political agendas’ promote the government’s national policy, and the ‘service enterprise’ type is organised as an ‘instrument’ to meet the needs of external stakeholders and ‘customers’ in a competitive environment (p. 29). The top row of the organizational paradigm analysis framework (Table 1) is defined on the basis of the above. As noted above, Kagono [43] states that the organizational paradigm is composed of three concepts: the ‘metaphor’, the ‘daily theories’ meaning the organizational culture and the ‘exemplar or example’ meaning representations of actual reality, of which only metaphor and organizational culture related to the perceptions of the members were placed in the leftmost column. Furthermore, the sub-concepts of metaphor are also discussed above Kagono [43] and are divided into the following categories: ‘the ideal state of the university’, ‘the relationship between the university and its members’ and ‘the relationship between the university and society’. In the upper row, the ‘daily theory’, organizational culture, was placed. Next, in the second column, the ‘constitutive logic’ in Olsen (Table 1) was used for ‘the ideal state of the university’. For ‘the relationship between the university and its members’, as it was difficult to find an evaluation perspective equivalent to Olsen’s (Table 1). The author used the ‘dominant unit’, the ‘internal references’ and the ‘administrator roles of servant of…’ from McNay [45] in Table 9.1 (p. 109: hereafter ‘McNay (Table 9.1)’). For ‘the relationship between the university and society’, we used the ‘reasons for autonomy’ from Olsen (Table 1) and the ‘models of universities as organizations’ from McNay (Table 9.1) , together with Figure 9.1 (p. 106) from [45], which shows the four types of university models. In integrating McNay (Table 9.1) and Olsen (Table 1) for the above items, based on the suitability of each type, the ‘bureaucracy’ corresponds to the ‘community of scholars’, the ‘collegium’ to the ‘representative democracy’, the ‘corporation’ to the ‘instrument for national political agendas’ and the ‘enterprise’ to the ‘service enterprise’. Based on the above, the ‘organizational paradigm analysis framework’ was constructed.

Dimension of organizational paradigm		Institution	Instrument
		A rule-governed community of scholars	A representative democracy	An instrument for national political agendas	A service enterprise embedded in competitive markets
Organizational culture
Competing values framework		Flexibility and discretion		Stability and control
		External focus and differentiation	Internal focus and integration	Internal focus and integration	External focus and differentiation
		Adhocracy	Clan	Hierarchy	Market
Metaphor
The relationship between the university and society	Reasons for autonomy	Constitutive principle of the university as an institution: authority to the best qualified	Mixed (workplace democracy, functional competence, realpolitik)	Delegated and based on relative efficiency	Responsiveness to ‘stakeholders’ and external exigencies, survival
	Models of universities as organizations	Bureaucracy	Collegium	Corporation	Enterprise
	Nature of change	Reactive adaptation	Organic innovation	Proactive transformation	Tactical flexibility
The relationship between the university and its members	Dominant unit	Faculty/committees	Department/individual	Institution/senior management team	Sub unit/project teams
	Internal references	The rules	The discipline	The plans	Market strength/students
	Administrator roles: servant of …	The committee	The community	The chief executive	The client, internal and external
The ideal state of the university	constitutive logic	Identity based on free inquiry, truth finding, rationality and expertise	Interest representation, elections, bargaining and majority decisions	Administrative: implementing predetermined political objectives	Community service. Part of a system of market exchange and price systems

Table 1.

The organizational paradigm analysis framework.

Source: [44, 45, 46]. Refer to Section 4.2.

Next, we refer to organizational culture. Cameron and Quinn [46] defined the competing value framework (CVF) based on two dimensions of organizational culture, external/internal and stability/flexibility, and proposed four organizational culture typologies: adhocracy, market, hierarchy and clan. Adhocracy is concerned with innovative and pioneering initiatives (p. 43), which it states represents the characteristics of an organization’s emphasis on mainly in the business of developing new products and services and preparing for the future (p. 43). The same external focus dimension, market emphasis on stability and control than adhocracy. Market’s special character lies in its transactions with (mainly) external constituencies (p. 39), which differs from the hierarchy’s emphasis on internal constituencies. The most important aspect of market culture is the emphasis on transaction costs which Williamson [14] proposes (p. 39). Hierarchy assumes Weber’s bureaucracy, an organizational characteristic that emphasises stable, efficient, highly consistent products and services (p. 37). This assumption provides validity when the external environment is stable, sectional functions are integrated and members are under control (p. 37). The clan is an organizational cultural characteristic exemplified in Japan during its period of rapid economic growth (1960s to early 1970s) and derived from the Japanese-style management of shared values and goals, cohesion, participativeness, individuality and a sense of ‘we-ness’ (p. 41).

Based on the above typologies, the organizational culture in CVF corresponds to adhocracy as ‘community of scholars’, clan as the ‘representative democracy’, hierarchy as the ‘instrument for national political agendas’ and market as the ‘service enterprise’.

5. Organizational failures framework in university

5.1 Organizational failures framework in profit organization

The purpose of this section is to present an analytical framework for clarifying the inherent mechanisms related to ‘the organizational failures’ in universities. In order to proceed with this discussion, we first identify the analytical framework of ‘the organizational failures’ presented by Williamson [14], on which the above-mentioned author’s analytical framework relies.

Five factors were identified by Williamson [14] as contributing to the failure to construct the world of frictionless ideal [14] in organizations. Among them, the combination of the thick arrows shown in Figure 1—Bounded rationality and uncertainty/complexity, as well as opportunism and the exchange relationship between small numbers—are the main factors in the organizational failures. On the other hand, information impactedness is a derivative factor, primarily arising from uncertainty and opportunism, which themselves produce small numbers. And these transactions take place inside the atmosphere. Similar to the above, bounded rationality based on value and opportunism based on value differences can arise in university, but these mechanisms cannot be explained in the diagram below and require a specific framework.

Figure 1.

The organizational failures framework. Source: [14] p. 40, Figure 3.

5.2 Transaction cost theory as a constructive ‘stakeholder theory’

In creating an analytical framework for the organizational failures in universities, we next draw on Casson [47], who examined leader–follower relationships in the intellectual professions from the perspective of transaction cost theory. Casson [47] states that leader–follower relationships can be seen as transactions in which the follower agrees (informally) to work hard in return for some benefit – emotional or material – conferred by the leader (p. 48).

This perspective is even more valid in universities where hybridisation around value is occurring, and it is possible to view the relationship between university administrators and faculty as such a transaction. The introduction of a perspective simultaneously brings attention to the invisible costs of transaction in resolving intergroup conflict within organizations. Casson [47] defined the costs required for leaders to exert influence over their followers as the manipulation costs. Furthermore, Casson [47] divided the manipulation costs into the fixed costs that depend on the number of followers and the variable costs that depend on leader’s intensity and not on the number of followers. The above costs were defined as the direct costs, in addition to which lost profits due to follower negligence were defined as the indirect costs. And through comparing the transaction costs of manipulating these followers with the costs of monitoring, he argues that in intellectual work such as research and professional services (except in cases where intellectual negligence can cause serious harm, such as clinical medical safety), it is more important to make leadership work than to increase monitoring costs.

It should be noted that transaction costs have the limitation that the cost of transacting are real; they are not always easily separated from other kind of costs (p. 34) [10], but the interest of this paper is not the quantitative measurement of transaction costs for the purpose of comparing costs and benefits. As Montgomery and Snyder [48], who measured library administrative costs, pointed out that the most important factor for minimising costs is not detailed cost measurement, but increasing the number of users using existing resources. A detailed cost–benefit analysis focusing on transaction costs for a university would not only be of little research significance from a practical perspective but also, as Milgrom and Roberts [10] point out, itself be almost impossible to attempt.

However, this does not diminish the value of applying transaction cost theory to a university. Although the phenomenon that transaction cost theory initially intended to address was the problem of vertical integration, sometimes referred to as ‘the canonical TCE case’ [49]. Ketokivi and Mahoney [49] notes that transaction cost theory is beneficial in providing ‘a useful contrast and counterpoint’ perspective to other organizational theories that focus on ‘competence- and power-based theories of the firm’. Casson [47] could be said to have offered a new perspective on leader–follower relationships, not of power or competence, but of transaction.

While the leader–follower mentioned above can be positioned as a ‘stakeholder’ within the university, a theoretical system that focuses on the relationships between different stakeholders, such as customers, suppliers, communities, employees and financial institutions, and tries to understand capitalism through these overall relationships is called as stakeholder theory; this theory focuses on issues of value creation and transactions, the ethics of capitalism and management mindset [50]. This theory is considered a useful theory in a university where moving towards a ‘holistic model’ and simultaneously generating ‘hyblidisation’ based on the differences of values among members. But a few studies in university governance research have focused on stakeholder theory [51]. Ketokivi and Mahoney [52], on the other hand, point out that the principles of stakeholder theory—cooperation, involvement and responsibility—are underpinned by problematic concerns such as opportunism, trust and pre-regulation of potential conflicts and that these problematic concerns in the basic principles of stakeholder theory are consistent with transaction costs theory. And Ketokivi and Mahoney [52] conclude that transaction cost theory can indeed be applied as a constructive stakeholder theory. The significance of applying transaction cost theory to a university with intergroup conflict within organization under heterogeneous values is not in the vertical integration or the comparison of costs and benefits, but in clarifying the mechanisms of construction and failure of ‘cooperation, involvement and responsibility’ among stakeholders as a constructive stakeholder theory.

Figure 2 shows the organizational failures framework in university. The outermost dotted line represents the organizational culture as a whole in a university. However, there are university administrators (leaders) and faculty members (followers) with heterogeneous organizational paradigms underneath. These stakeholders have an organizational culture that is a subculture, and underlying this culture is a metaphor that they believe in about the nature of the university, the relationship between the university and its members and society. This metaphor then forms a bounded rationality.

Figure 2.

The organizational failures framework in university. Source: Author.

On the other hand, the executive and administrative staff of the university (leaders) try to exert influence through governance (organizational structures and procedures) or leadership and elicit ‘cooperation, involvement and responsibility’ from the faculty (followers). However, opportunism can easily occur in intellectual work where ‘monitoring’ does not function effectively. This mechanism shows ‘the organizational failures’ in university that this paper assumes.

At the lowest part, in ‘organizational outcomes’, efficiency will be a stronger indicator of the consequences of ‘the organizational failures’ than effectiveness. On the other hand, what is even more important for organizational research, and what researchers truly want to know, is why organizations fail. In determining this cause, the organizational culture and the value perceptions of its members will provide useful information. The metaphor of the constituency is different when the dominant organizational culture of the faculty is adhocracy, which emphasises creativity and innovation, and when it is market, which emphasises gaining competitive advantage. Therefore, when similar governance and leadership is applied to these universities in eliciting faculty collaboration and engagement, the responses may be quite different. Similar results may be observed across different establishers (national, local and private). Furthermore, different academic disciplines will have different metaphors, and the occurrence of opportunism will differ depending on whether tenure is granted or not. By using ‘the organizational paradigm analytical framework’ presented in this paper together with ‘the organizational failures framework in university’, organizational culture can be an analytical perspective for fact-finding on the organizational failures in universities.

6. Conclusion and discussion

This paper has focused on the heterogeneity of values surrounding ‘freedom’—‘freedom as control’ on the part of management and ‘academic freedom’ on the part of faculty—as an essential issue of hybridisation that has emerged in universities in a knowledge-based economy and has proposed two analytical frameworks to treat organizational culture arising from this as an analytical perspective of organizational failure. In the first framework, the concept of organizational paradigm was introduced in an attempt to connect metaphors, which are the perceptions of values held by university members, with the concept of organizational culture arising from them, and a categorisation of these paradigms was attempted, and an ‘organizational paradigm analysis framework’ was presented. The second analytical framework presented in this paper is the ‘organizational failure framework’ specific to university in order to examine why organising in universities has not progressed easily and to avoid organizational failure. This framework proposed the necessity to focus not only on governance and leadership, such as procedures and structures, but also on the type of organizational paradigm that leaders and followers have.

We would like to mention the significance of this research in light of the above. Universities are required to be responsive to their external environment, and in order to achieve this, we must focus on conflicts of values. Organizational culture studies have two trends: interest in the cultural form of organizational culture and interest in its impact on outcomes, but in order to examine the above issues, it is necessary to integrate the two trends, but until now, no such efforts have been made. The significance of this study was the integration of these two trends into a single framework, with regard to cultural forms in the ‘organizational paradigm analysis framework’ and the impact on outcomes in the ‘organizational paradigm analysis framework’. Effective policy recommendations will be possible through the hypotheses formulated by the NPM and the execution of analyses based on the two frameworks.

On the other hand, a limitation of this study is that it does not incorporate the perspective of comparing transaction costs based on a quantitative perspective within the ‘organizational failure framework’. However, this is an unavoidable consequence. As mentioned in Section 5, universities are composed of stakeholders with diverse values and cannot maximise value by measuring quantitative costs and benefits, so there is little significance in incorporating such a perspective into this framework. Rather, the purpose of this framework is to present a framework for pre-regulation [52] against opportunism and potential conflicts that obstruct ‘cooperation, involvement and responsibility’, which is also a principle of stakeholder theory, as described in Section 5, and the above problematic concerns overlap with those of transaction cost theory. It will be necessary to clarify the limitations of the above based on the characteristics of university. Another limitation in this study is that the framework focuses on the relationship between leaders and followers but does not reflect the perspective of organizational learning, especially among followers.

Three directions for future research should be mentioned. First, with regard to the ‘organizational paradigm analysis framework’, the validity as a constitutive concept of organizational paradigm and the differences between types of organizational paradigm should be clarified through empirical research on the linkage between metaphor and organizational culture. Second, with regard to the ‘organizational failure framework’, it is important to examine the homogeneity or heterogeneity of organizational paradigms between the university executive (leaders) and the university faculty and staff (followers), as well as the types of these paradigms. Based on the above findings, it is important to identify how the effective ‘transactions’ of governance and leadership between leaders and followers, aimed at establishing cooperation and engagement, vary according to the organizational paradigm. As a research direction, the last point I would like to make is the importance of research based on property rights: Jones [53] provides valuable insights into the relationship between organizational culture, transaction costs and property rights, but from an empirical perspective, it is important to clarify the relationship between the organizational paradigm that leaders have and property rights. Because property rights provide a legitimate basis for the exclusion of followers who do not ‘go along with a leader’s will’, and leaders may rely on that legitimacy to guide followers towards the achievement of arbitrary organizational objectives. This perspective is crucial in deterring organizational opportunism and realising organizational responsiveness to the external environment through leader–follower alignment.

As the organizational model of universities shifts towards a ‘holistic model’ [1] in a knowledge-based economy, a focus on organizational culture will provide a useful analytical perspective in clarifying intergroup conflict within organizations regarding their ‘values’. Although this paper has focused on the internal university, the two analytical frameworks presented in this paper can also be extended to the analytical framework of failures in collaboration between industry and universities and in ‘transdisciplinary research’ [13]. Kandawinna, Mallawaarachchi and Vijerathne [54], who examined the requirements for the formation of ‘public–private partnerships’, which are partnerships between universities and industry, found that organizations with different interests can be successful in achieving common objectives through discussion and communication. This finding shows the importance of formulating the metaphor between stakeholders. On the other hand, the effectiveness of the means of establishing ‘transactions’ between these stakeholders will vary depending on the objectives and commerciality of the collaborative projects they work on. Organizational culture may provide an analytical perspective when building these relationships runs into difficulties.