Academy of Management

Dimensions of Organizational Environments: An Exploratory Study of Their Impact on
Organization Structure
Author(s): Rosalie L. Tung
Source: The Academy of Management Journal, Vol. 22, No. 4 (Dec., 1979), pp. 672-693
Published by: Academy of Management
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?Academy of Management Journal
1979, Vol. 22, No. 4, 672-693.
Dimensions of Organizational
Environments: An Exploratory
Study of Their Impact on
Organization Structure
ROSALIEL. TUNG
Universityof Oregon
This study sought to (1) develop a comprehensive

typologyfor interpretingand analyzingorganizational
environments, (2) empirically test the validity of the
typology, and (3) examine the relationships between
threeenvironmentalcharacteristics(complexity,change
rate, and routinenessof problem/opportunitystates),
perceived environmental uncertainty, and organiza-
tional variables.It wasfound that the threeenvironmen-
tal dimensions had a significant impact on organiza-
tional characteristics.
Since the late 1950s, many leading organizationaltheoristshave advo-
cated an open systemsapproachto the studyof organizations.In essence,
the open systems approach calls for an investigationof organization-
environmentinteraction.Despite the fact that most books on organiza-
tional theory and behaviorpublishedafter the mid-1960shave either ex-
plicitlystated or alludedto the importanceof the environment,intensive
analysesor empiricalstudiesof organizationenvironmentalcharacteristics
havebeenlimited.A majorimpedimentherehas been how best to describe
and conceptualizeorganizationalenvironments.
The smallnumberof empiricalstudieson organization-environment in-
teractionavailableto date have adheredlargelyto the four-celltypologies
advanced by Thompson (1967), and Lawrenceand Lorsch (1967). Al-
though the typologies presented by these theorists have contributed
significantlyto an understandingof organization-environment interac-
tions, more comprehensive typologies of organizationalenvironments are
needed. A more elaboratetypology, encompassinga greaternumberof
dimensions for characterizingthe environment, would assist organiza-
tional researchersand practitionersin viewingthose unitsthat fall into the
"6grayzones" but that hithertohave been rathercrudelylumpedinto one
672

1979 Tung 673
of four primarycells in the absenceof a more comprehensivetypology.

The results of studies based on a more comprehensivetypology would
enrichthe existingbody of knowledgeand rangeof instrumentsavailable
for understandingand interpretingthe environment.These contributions
could, in turn, assist in the developmentof better "fits" betweena given
organizationalunit and its environmentthroughmoreaccurateperception
of the latter's pervadinginfluence on the former's success and long run
survival.
If a more complex typology is to be developed, a major aspect to be
consideredis the nature and quality of the problemand/or opportunity
states confronting the organizationalunit. Severalresearchers(Perrow,
1970; Duncan, 1972; Jurkovich, 1974) have discussedthe relevanceof
viewing organizational environments in terms of routineness versus
nonroutinenessof problem/opporutnitystatesand have hypothesizedthat
such properties could alter organization structure and functioning.
However,to date no empiricalresearchhas incorporatedthe "routineness
of problem/opportunitystates" as one of the key dimensionsof organiza-
tional environments,nor have operationaldefinitionsbeen developedfor
this construct.
Hence, this study soughtto developand verify, on an empiricalbasis, a
more comprehensivetypology of organizationalenvironmentsthat would
include the "routineness of problem/opportunitystates" dimension.
Operationalmeasuresfor this constructweredevelopedand modifications
to existing measuresof complexityand change rate dimensions(used in
previousstudies)were made. The study then sought to examinethe rela-
tionships between these three environmentalproperties, perceived en-
vironmentaluncertainty,and certainorganizationalcharacteristicssuch as
structure,time perspectivetakenin planning,and frequencyof changesto
plans and policies.
A TYPOLOGY OF ORGANIZATIONAL ENVIRONMENTS
For purposes of operationalizationand measurement,a distinction

should be made betweenthe compositionof organizationalenvironments
and environmentalcharacteristicsor dimensions.The formerrefersto the
factors and components that comprisethe focal unit's environment.In
this study, Duncan's(1972)list of factorsand componentscomprisingthe
environmentwas used. Duncan made a distinctionbetween the internal
and externalenvironments.The internalenvironmentrefersto all those in-
ternal forces operatingwithin the organizationitself, such as the com-
pany's objectivesand goals, natureof the organization'sproductsand/or
services,communicationprocessesand networkswithinthe organization,
and the educationalbackgroundof employees.The externalenvironment
refers to all those things outside the company, such as customers,com-
petitors,suppliers,governments,and tradeunions. In this study, the term
environmentrefersto both the internaland externalenvironments.Each

674 Academy of Management Journal December
of these factors and components comprisingthe environmentcould be

treatedas a stimulusto which the focal unit is exposed and which may,
alone or in conjunction with several others, elicit or affect the actions
taken by that unit. Environmentalcharacteristicsor dimensions,on the
other hand, refer to the attributesof the environmentconfronting the
focal unit or what Emeryand Trist(1965)describeas the "causaltexture"
of organizationalenvironments.These could be turbulentor stable, com-
plex or noncomplex,routineor nonroutine.
The three environmentaldimensionsinvestigatedin this researchwere
complexity,change rate, and routinenessof problem/opportunitystates.
These dimensionswere used to arriveat the eight-celltypology presented
in Figure 1 and discussedlater.
FIGURE 1
A Typology of Organizational Environmentsa
Low Complexity High Complexity

Routineness Nonroutineness Routineness Nonroutineness
1 2 3 4
n = 21 n =6 n = 5 n =2
Low U = 4.28 U = 4.16 U = 3.78 U = 3.33
Change Rate S = 4.42 S = 4.05 S = 3.50 S = 2.78
T = 4.26 T = 4.08 T = 3.50 T =2.00
C = 1.24 C = 1.58 C = 2.00 C = 2.00
5 6 7 8
n = 12 n = 3 n = 10 n = 5
High U = 3.36 U = 3.41 U = 2.35 U = 1.85
Change Rate S = 3.80 S = 3.33 S = 2.64 S = 2.30
T = 2.41 T = 3.66 T = 3.25 T = 3.00
C = 2.94 C = 2.93 C = 3.86 C = 4.20
an = number of cases in the cell; U = Uncertainty. A low score indicates high uncertainty. A high
score indicates high certainty; S = Structure. A high score indicates mechanistic structure. A low
score indicates organic structure; T =Time perspective taken in planning. A high score indicates
long range planning perspectives; C = Frequency of changes to plans. A high score indicates fre-
quent changes.
Previous researchon organization-environment interactionhas shown

that the complexityand changerate dimensionsdo have a significantim-
pact on organizationstructure(Emery& Trist, 1965;Lawrence& Lorsch,
1967;Child, 1972; Duncan, 1972; Osborn& Hunt, 1974). As mentioned
previously,researcherslike Perrow(1970), Duncan (1972), and Jurkovich
(1974) have argued for the relevance of viewing organizational en-
vironmentsin termsof routinenessversusnonroutinenessof problem/op-
portunitystates and have hypothesizedthat such properties,in conjunc-
tion with complexityand change, could affect the chief executiveofficer's
(CEO) perceptionof environmentaluncertainty,which in turn could in-
fluence his strategicchoices with respect to structure,time frame, and
policy changes.

1979 Tung 675
As used in this study, environmentalcomplexityrefers to the number

and heterogeneity/diversityof factorsand componentsthat the focal unit
has to contend with in decision making. As the numberand diversityof
environmentalfactors and components increase, they increasinglylimit
the CEO's cognitive abilitiesto grasp and comprehendthe relationships
that exist among them. This thus increasesthe amount of uncertainty
perceivedby the CEO (Simon, 1960;Lawrence& Lorsch, 1967;La Porte,
1971;Duncan, 1972;Downey & Slocum, 1975). Changerate refersto the
frequencyand magnitudeof turbulencethat prevailsamong environmen-
tal factors and components. When the factors and componentscompris-
ing the focal unit's environmentare in a constant state of flux, the unit
finds it difficult, if not impossibleat times, to keep itself up-to-dateon all
the changes and their implicationsfor its own operationsand activities.
The change rate dimension thus influences the amount of uncertainty
perceivedby the CEO (Lawrence& Lorsch, 1967; Thompson, 1967; La
Porte, 1971;Duncan, 1972;Downey& Slocum, 1975).The routinenessof
problem/opportunity states dimension refers to the variability and
analyzabilityof the stimuli confrontingthe organizationalunit (Perrow,
1970). Where variability is low and stimuli fairly analyzable, i.e., in
repetitivedecisionsin which situationsof a similarnaturehave occurred
before, the cognitive load requiredis reduced considerably.Thus the
amount of uncertaintyperceivedby the CEO is reduced. It should be
noted that the degreeof perceivedenvironmentaluncertaintyexperienced
by the CEO is not solely the function of environmentalcharacteristics.
Severalresearchers(Duncan, 1972;Anderson& Paine, 1975; Downey &
Slocum, 1975)have indicatedthat other variables,such as the degreeof
tolerance for ambiguity and internal versus external locus of control,
could influence the degree of perceived environmental uncertainty.
However,it was not within the scope of this study to examinethe impact
of these othervariablesand how they interactwith each otherto producea
resultingdegreeof perceiveduncertainty.
The first set of hypothesesinvestigatedsought to examinethe relation-
ships betweenenvironmentalcharacteristicsand perceivedenvironmental
uncertaintyin the four extremecornercells of the 8-cell typology (Figure
1). Variationsin perceivedenvironmentaluncertaintywere hypothesized
(and tested)acrossall eightcells, althoughsuch variationsnaturallywould
be more distinctand significant(in a statisticalsense) among the four ex-
treme corner cells. The first set of hypotheses may thus be stated as
follows:
Hypothesis 1: A CEO operatingin an organizationalunit located
in an environmentcharacterizedby low complexity, high routine-
ness, and low change rate (ie., cell 1) would experiencethe lowest
amount of perceiveduncertainty.
Hypothesis2: A CEO operatingin an organizationalunit located
in an environmentcharacterizedby high complexity, low routine-
ness, and low changerate (i.e., cell 4) wouldexperiencea moderately
high degreeof perceiveduncertainty.


in an environmentcharacterizedby low complexity, high routine-
ness, and high changerate(i.e., cellS) wouldexperiencea moderately
low degreeof perceiveduncertainty.
in an environmentcharacterizedby high complexity, low routine-
ness, and high changerate (i.e., cell 8) would experiencethe highest
degreeof perceiveduncertainty.
In previousresearchutilizingthe 4-cell typologies(Lawrence& Lorsch,
1967; Duncan, 1972), change rate was found to be the most important
single contributorto perceivedenvironmentaluncertainty.However, it is
the contention of the present researcher that the complexity and
routinenessdimensionsin conjunction would have a greaterimpact on
perceived environmental uncertainty than would change rate alone,
becausethe heterogeneity/diversity of factorsand componentscomprising
the environment and the variability unanalyzabilityof the stimulicon-
and
fronting the organizationalunit could substantiallyincreasethe CEO's
perceptionof uncertaintyeven though the rate of change may be low.
Consequently,it was hypothesizedthat a CEO operatingin an organiza-
tional unit characterizedby high complexity,nonroutinenessof problem/
opportunitystates but low changerate (cell 4) would experiencea slightly
higherdegreeof perceiveduncertaintythan would a CEO operatingin an
organizationalunit characterizedby low complexityand routinenessof
problem/opportunitystates but high changerate (cell 5).
Duncan's (1972) operationalizationof the perceived environmental
uncertaintyconstructwas adaptedfor use in this study. Most researchers
(Perrow, 1970;Child, 1972;Duncan, 1972)who investigatedthe concepts
of environmentand uncertaintyhave shownthat it is perceptionsof uncer-
tainty, ratherthan actualuncertainty,that are the importantdeterminants
in decision making and strategyformulationprocessesin organizations.
To cope with perceivedenvironmentaluncertainty,the organizationalunit
has to adapt the internalstructuringof its departmentto respondto such
environmentalconstraints.Internalstructuringand plannedstrategiesare
some of the means by which organizationsseek to approachsome degree
of rationality(Thompson, 1967). The success, and indeed survivalof the
unit, is dependenton the choice and adoption of structuresand strategies
suitablefor the particularsituationwith which it is confronted.
It is arguedthat the environmentconfrontingorganizationsin different
industriesand units within the same organizationdo differ, although in
varyingdegreesand along differentdimensions.Given this premise,then
there is no one best way of structuringinternalactivitiesand operations,
and no one best strategythat would be applicableacross all units and in-
dustries. In essence, this calls for a contingency approach to handling
perceivedenvironmentaluncertainty.
Most organizationsavailthemselvesof one of two strategiesfor dealing
with perceivedenvironmentaluncertainty.One strategyinvolves passive

1979 Tung 677
adaptationto changingenvironmentalconstraintsand demands.An alter-

native strategyinvolves actively managingand monitoringthe environ-
mentto reducethe level of perceiveduncertainty.No one organizationcan
resortto either strategyexclusivelyall the time.
This study dealt only with the way in which organizationalunits sought
to adapt to environmentaldemandsby means of internalstructuring,the
time perspective taken in planning, and the frequency of changes/
modifications to plans and policies. Duncan's (1972) three basic com-
ponents constitutingthe perceivedenvironmentaluncertaintyconstruct
wereall "explicitlyor implicitlygroundedin the conceptof informationas
a counterpartof uncertainty"(Downey& Slocum, 1975,p. 570). Thus, in
orderto deal with perceivedenvironmentaluncertainty,the organizational
unit was hypothesizedto structureits internal components and adopt
planningperspectivesand strategiesso that the acquisitionand dispersion
of information needed for decision making and functioning would be
facilitated.
The various elementsof internalstructuringthat have frequentlybeen
investigatedby researchersare standardization,formalization,participa-
tion in decision making, and role specialization(Burns& Stalker, 1961;
Hage & Aiken, 1967; Pugh, Hickson, Hinings, & Turner, 1969). All or
most of these variableshave been used at differenttimes in the identifica-
tion of organic or mechanistic structures. Burns and Stalker (1961),
Woodward (1965), Thompson (1967), Perrow (1970), and others have
presented evidence to support their contention that if the degree of
perceivedenvironmentaluncertaintyis low, a more rigid or mechanistic
structurewould be more appropriate.This follows becausethe informa-
tion gathering and processing needs for decisions are expected to be
minimal.The decisionsthat will arisein the unit are expectedto be fairly
routine and informationon how to handle and dispose of such cases is
assumed to be well known or easily accessible.Thus, the establishment
and impositionof rules and proceduresthroughstandardizationand for-
malizationare possible. In addition, the extra amount of time and effort
involvedin participatorydecisionmakingis assumedto be necessaryand
uncalledfor becausethe solutionis thoughtto be fairlywell known. Also,
when decisions and procedures are of a generally routine nature,
specializationneeds are reducedto a minimum.On the otherhand, under
conditions of high perceiveduncertaintyand resultinghigh information
demands, a more flexible or organic structurewould be more suitable.
Standardizationand formalizationof rulesand procedureswould be kept
to a minimumbecauseeach new case or situationwould be assumedto be
so differentthat routinesand proceduresthat had been tried out before
are renderedinapplicablefor the presentcircumstances.Underconditions
of high perceiveduncertainty,greaterparticipationin decision makingis
encouragedbecause the novelty of the situation calls for variety in ap-
proaches (Hage & Aiken, 1969). At the same time, CEOs experiencing
high uncertaintywould employ more specialistsin the hope that their

greaterexpertisein a particularfield would help reduce the amount of

perceiveduncertainty(Thompson, 1967;Child, 1972).
In addition, it was hypothesized that the amount of perceived en-
vironmentaluncertaintyexperiencedby the CEO in the focal unit could
affect his strategicchoice with respectto time perspectivetaken in plan-
ning and the frequencyof changes to plans and programsfor that par-
ticular unit. Organizationalunits operatingin a fairly stable and certain
environmentwereable to adopt longerrangeplanningstrategieswith ease
and with few modificationsalong the way. On the other hand, organiza-
tional units operatingin a high unstableand uncertainenvironmentwere
forcedto resortto shorterrangeplanningstrategies,and one would expect
frequentmodificationsas changesintrudeupon plans.
The organizational characteristicsinvestigated in this study were:
(1) The extentof structuringof operatingactivitieswithinthe department.
This was measuredin termsof (a) the degreeof standardization,i.e., the
extentto whichoperationsin the departmentweresubjectto rules(Hage&
Aiken, 1967);(b) formalization,i.e., the extent to which rules were writ-
ten down; (c) the role specialization,which refersto the divisionof labor
(Pugh et al., 1969);and (d) the degreeof decentralizationin decisionmak-
ing (Taylor& Bower, 1972);(2) The time perspectivetaken by the focal
unit in planning for its future activities; (3) The frequency of
changes/modificationsto existingpolicies and programsover the lifetime
of such policies and programs.
The second set of hypothesesinvestigatedrelationshipsamongthese en-
vironmentaldimensionsand the threeorganizationalcharacteristicsin the
four extremecornercells of the 8-cell typology. Variationsin departmen-
tal structure,time perspectivetakenin planning,and frequencyof changes
to plans werehypothesized(and tested)acrossall eight cells althoughsuch
variationsnaturallywould be moredistinctand significantamongthe four
extremecornercells. The second set of hypothesescould thus be statedas
follows:
in a cell 1 type of environmentmost likely wouldadopt a mechanistic
structureand wouldengage in long rangeplanning withfew modifi-
cations to plans along the way.
in a cell 4 type of environmentmost likely wouldadopt a moreflexi-
ble structureand wouldengagein long rangeplanning withfew mod-
ificationsto plans.
Hypothesis 7: A CEO operatingin an organizationalunit located
in a cell S type of environmentmost likely wouldadopt a moremech-
anisticstructureand wouldengagein short rangeplanning withmore
modificationsto plans.
in cell 8 type of environmentmost likely would adopt an organic
structureand would engage in short rangeplanning withfrequent
modificationsas changesintrudeuponplans.

1979 Tung 679
The complexity and routinenessdimensionsin conjunction were hy-

pothesizedto have a greaterimpacton departmentalstructurethan would
changerate alone becausethe procedures(standardization,formalization,
etc.) adopted by the organizationalunit are developed/evolvedmore in
responseto the diversityof factors/componentsand to the variabilityand
unanalyzabilityof the stimuliconfrontingthe focal unit ratherthan to the
turbulencein the environmentitself. On the other hand, departmental
policies, such as time perspectivetaken in planning and frequency of
changesto plans, are morelikelyto be influencedby the changeratein the
environment.These would serveto explainwhy a CEO operatingin a cell
4 type of environmentwould most likely adopt a more flexible structure
than would an organizationalunit located in a cell 5 type of environment.
METHODOLOGY
Unit of Analysis
The majorfocus of this studyis the environmentfaced by departmental

units in large organizations.One reason for using major departmentsin
organizations(ratherthan organizationsas entities)as the units of analysis
was to minimizethe washout effect. Many researchershave argued, and
indeed presentedevidenceto supporttheir contention, that the structures
and managerialpracticesamong differentdepartmentsin large and com-
plex organizationsdo vary(Lawrence& Lorsch, 1967;Weick, 1969;Dun-
can, 1972; Van de Ven, 1976). A second and perhaps more pragmatic
reason for using major departmentsas units of analysisstems from the
fact that manageabilityof organizationaleffectivenessmay be strongly
related to ability to manage more effectively the myriad of micro-
organizationalunits within the organization.
An analysis of covariance was performed across departmentsin an
organization to determine whether there were significant differences
among them. The significancevalues associatedwith the three organiza-
tional variables investigatedin this study were: departmentalstructure
(p<.02), time perspectivetaken in planning(p<.09), and frequencyof
changes to plans (p<.05). These figures provide justification for using
departments,ratherthan organizations,as units of analysis.
SampleSelectionand Data Collection
Data on environmentalcharacteristics,perceivedenvironmentaluncer-
tainty, and organizationalvariableswerecollectedfrom 64 organizational
units of 21 different companies located in Vancouver, Canada. These
companieswereengagedin sevendifferenttypes of business/industrialac-
tivities.
All the organizationsselectedfor studywerelargesizedcompanies.Size
was defined in terms of (a) number of employees-a minimumof 500

employeeswas used as a cutoff point; or (b) assetsof parentcompany;or

(c) diversityof products and/or servicesrenderedby the company. All
firms includedin the study met eitherone or all three of these criteria.
All the departmentsselected for the study met the following two
criteria:(1) Each performeda functionthat was distinctlydifferentfrom
that carriedout by the rest of the organization-for example,sales, pro-
duction, researchand developmentdepartmentswould be distinctively
differentunits. (2) Each departmentwas fairlyautonomous.The level of
autonomy was ascertainedby using a modified version of an instrument
developedby Inkson, Pugh, and Hickson (1970). The instrumentdeter-
mines the extentto whichthe focal unit has the authorityto make certain
decisions of a prespecifiednature, such as budgetaryindependenceand
the alterationof policies and strategiesfor pursuingdepartmentalgoals.
A structuredquestionnairewas administeredto the CEO of each of
these 64 organizationalunits. The questionswere developedso that only
the most senior man in the departmentwould have sufficient knowledge
and insightinto the areas probedin this study. The people who reported
directlyto him were not included in the sample for two reasons: (1) In
large organizations,each individualwho reports directly to the senior
departmentalexecutive is usually assigned to one particular area of
specialty.Thus, he would not have the perspectivenecessaryto answerthe
questions probed in this study. (2) The organizationalor departmental
chartsvariedfrom companyto company.In some instances,therewereas
many as six or seven people reportingdirectlyto the senior departmental
executive;in others, there were only two.
Operationalizationof EnvironmentalDimensions
The three environmentaldimensions used in this study were opera-

tionalizedalong the following lines.
Complexity-La Porte's (1971) definition of the complexityconstruct
served as a guideline for operationalizationof this concept. He defined
complexityas a functionof three sets of variables:(a) the numberof fac-
tors and componentsin the internaland externalenvironmentsthat must
be taken into considerationin decisionmaking, goal setting, and goal at-
tainment;(b) the relative differentiationor variety of these factors and
components;and (c) the degreeof interdependencyamongthe factorsand
components. The first two sets of variablesrefer to the heterogeneity/
diversityof the stimuli. The third set of variablesdeals with the extent to
whichthe variousfactorsand componentsin the environmentallist affect
or restrictthe CEO'sactivitiespertainingto goal setting, decisionmaking,
and goal attainment,and hencerelatesto the problemof manageabilityof
the stimuli.
Giventhis definitionof complexity,Duncan'soperationalizationof the
simple-complexdimensionwas deemedinadequatebecauseit merelyiden-
tifies the heterogeneityof the environment.Incorporationof the notion of

1979 Tung 681
manageabilityinto the simple-complexindex requireda determinationof

whetherthe factors and componentswere located in the internalenviron-
ment or the externalenvironment.Presumably,if the majorityof relevant
factors and components are located in the internal environment, the
amount of complexityconfrontingsuch a unit would be lower than that
for an organizationalunit whose relevant factors and components are
located primarilyin the externalenvironment.
The CEO of each organizationalunit first was askedto identifythe fac-
tors and componentsin the environmentallist that had to be taken directly
into considerationin makingdecisions. The respondentsthen were asked
in an open-endedquestionto indicatewhetherthe factorsand components
in the internal environmentor the external environmentposed greater
uncertaintyin decisionmakingand the attainmentof organizationalgoals,
and why. Of the 64 respondents,50 (or 78.12 percent)indicatedthat the
factors and componentsin the externalenvironmentposed greateruncer-
tainty. The principal reason given was that, in general, they had less
knowledge about these external factors and components. Information
about such factors and components was not as easily accessible and
analyzable.Also, becausethey were outside the organization,they were
less controllableand manageablethan those in the internalenvironment.
This providedjustification for differentialweightingof the factors and
componentsdependingon their location in the derivationof the index of
complexity(as will be illustratedsubsequently)becausewhereuncertainty
was perceivedto be high, the decisionmakerpresumablywould experience
greaterdifficultyin managingand controllingfor eventsand occurrences.
The formula for calculatingthe Simple-ComplexEnvironmentalIndex
was as follows: ((Factors,weightsassignedaccordingto location)x (Com-
ponents)2].Factorsthat werelocated in the internalenvironmentreceived
a weightingof 1 and those that were located in the externalenvironment
wereassigneda weightof 2. The numberof componentswas squaredas an
as was done in Duncan'sindex. "The
indicatorof similarity-dissimilarity,
rationalefor squaring(C) is that the amount of variancebetween com-
ponents is greaterthan the variancebetween factors and thus should be
weightedas such in the developmentof the index" (Duncan, 1970, pp.
54-55). This schemewas used to arriveat an overallmeasureof the com-
plexity dimension.Thus, a unit that had to take into considerationthree
factors, one of which was located in the internalenvironmentand two in
the external environmentbut in different components, receiveda com-
plexity index score of [(1 + 2 + 2) x 32 = 451. The set of figures in the small
bracketsrepresentsthe weightsassignedto each of the 3 factors. The 32is
equivalentto the C2in Duncan'sformulationof the Simple-ComplexEn-
vironmentalIndex, i.e., the numberof differentcomponentsin whichthe
relevantfactors are located. Under Duncan's formulation,the same unit
would receivea score of (3 x 32 = 27).
Movement-Previous researchhas suggestedthat movementis an im-
portantdimension(Emery& Trist, 1965;Lawrence& Lorsch, 1967;Child,

1972; Duncan, 1972; Osborn & Hunt, 1974). It is important to distinguish

the change rate (which includes the frequency and magnitude of change)
from the stability of change (or the predictability of the change pattern)
(Jurkovich, 1974). It is quite possible for an organization or organiza-
tional unit to experience rapid but largely predictable change in the en-
vironment. In such instances, the amount of uncertainty perceived by the
CEO is relatively low as he "knows reasonably well what environmental
conditions (the unit) will face in the future" (Miles, Snow, & Pfeffer,
1974, p. 248). The movement dimension was thus defined in terms of two
subcomponents, change rate and the stability of change.
The change rate dimension focused on the frequency and magnitude of
changes that took place in the factors and components that made up the
focal unit's internal and external environments. This dimension was
measured from certain information from the respondents. (1) The CEO
was asked to indicate on a 5-point scale the frequency of changes that took
place in each of the relevant factors and components in the environmental
list over the course of the past year or two. (2) After estimating the fre-
quency of changes in each of these factors and components, the CEO was
asked to specify on a 5-point scale the magnitude of each change in terms
of the seriousness of the impact it had upon the focal unit's operations.
A change rate index was then computed for each unit by multiplying the
frequency of changes by the magnitude of each change. A multiplicative
model was used in the computation of the change rate index because the
magnitude of change was assessed on a 5-point scale ranging from
1 = "not serious at all = may be annoying but does not require any reorien-
tation or modification to existing departmental goals, policies, or courses
of action pursued by the department" to 5 = "very serious = disrupting ex-
isting departmental goals and plans very seriously. Major reorientation or
modifications to existing goals and plans are required as a result of the
change." Consequently, even if the focal unit experienced a large number
of changes, if all the changes were assessed as not serious at all, the CEO's
degree of perceived environmental uncertainty should not increase
substantially because he could continue to pursue established goals and
procedures.
In addition, this change rate index took into consideration whether the
factors and components were located in the internal or external environ-
ment. Changes in the internal environment received a weighting of 1;
those in the external environment received a weighting of 2. Elements in
the internal environment presumably are easier to come to grips with;
hence the amount of perceived uncertainty posed by such factors and com-
ponents should be lower. In a similar vein, changes in elements in the in-
ternal environment presumably are more easily managed because informa-
tion about such changes and knowledge about ways and means of coping
with them are more abundant and fairly well defined. For example, it is
easier for a CEO to cope with his own company's new policies pertaining
to the marketing and sale of its products than it would be for him to stay

1979 Tung 683
on top of the new marketing strategies adopted by his competitors in the

industry
The formula for calculating the change rate index for each respondent
was:
Re -
Change Rate Frequency of Magnitude Weighting assigned to
Cangex qe x oMange x change depending
upon its location
Thus, a respondent who indicated that the frequency with which his
departmental unit had to contend with changes in each of the relevant fac-
tors (assuming the first two are located in the external environment and
the remaining in the internal environment) is 2, 4, and 5, respectively, and
who estimated the magnitude of such changes to be 5, 4, and 3, respective-
ly, would receive a change rate index score of ((2 x 5)(2) + (4 x 4)(2) +
(5 x 3)(1)] = 67.
The stability of change subdimension focused on the stability and
predictability of contingencies confronting the focal unit. An investigation
of this subdimension took the following into consideration: (1) The extent
to which the focal unit has to contend with the same factors/components
in the environment over time. Duncan's (1972) operationalization of this
variable was used in this study. (2) Duncan's operationalization of the
static/dynamic dimension merely revolved around the stability of the fac-
tors dealt with by the focal unit and the frequency with which new factors
are taken into consideration in the decision making process. It is argued
that such assessment is not sufficient. Any operationalization of the
stability of change rate dimension must incorporate some measure of the
predictability of the change rate, i.e., did the change follow a trend, or
was the change more or less random? If the latter, the change would be so
sudden and completely unpredictable that the focal unit probably would
be far less likely to possess the capabilities to cope with the change. It was
hypothesized that changes of the latter sort would greatly increase the
degree of environment uncertainty perceived by the CEO.
The predictability of change rate or trend was assessed from reported in-
formation. (1) The CEO was asked to indicate on a 5-point scale the ade-
quacy or inadequacy of the warning period preceding the onset of the
change. All organizations face changing environments to a certain extent.
Whether an organization can respond successfully and adapt to such
changes depends to a large extent on whether there is considerable lead
time so that the organizational unit can gather "reasonably adequate in-
formation as to what might be expected to plan the adaptation" (Haas &
Drabek, 1973, p. 267). Each unit's score on this variable was obtained by
summing and then averaging the subject's response to each of the relevant
factors/components in the internal and external environments. Thus, a
respondent who had to take 'three factors into consideration in decision
making and who indicated the "adequacy of warning period" associated
with each of these factors as 3, 2, and 4 would receive an overall score of

(3 + 2+4) ?3] = 3. (2) The CEO was asked to indicate on a 5-point scale
the extent to which his department knows what to expect after the change
takes place. The unit's score on this variable was calculated in a manner
similar to that for the adequacy of warning period.
Each departmental unit's score on the stability of change dimension was
calculated by adding and then averaging the respondent's subscores
(following interitem analysis) on the three items above, namely: (a) fre-
quency with which new and different elements have to be taken into con-
sideration, (b) adequacy of warning period, and (c) knowledge of what to
expect.
In subsequent correlation and factor analyses it was found that the
change rate index did not correlate with nor did it load on the stability of
change index. Rather the items comprising the latter index loaded highly
with the items comprising the routineness of problem/opportunity states
dimension. Consequently, change rate and stability of change were not
combined to form a measure of movement.
The Routineness of Problem/Opportunity States-Simon's (1960) no-
tion of the programmability of decisions and Perrow's (1970) concept of
the analyzability and variability of the stimuli were expanded upon in the
operationalization of this dimension. Perrow distinguished between the
analyzability and variability of the stimuli or problem/opportunity states
because the two elements need not go hand in hand: "Because no two
stimuli ever present themselves in exactly the same manner, a stimulus is
said to be analyzable when incremental adaptations from existing pro-
grams or portions of existing programs can easily be made to standardize
the new situation" (1970, p. 75ff.). Where the stimulus is unfamiliar or
unanalyzable, "considerable search behavior must be instituted." The
variability of the stimuli, on the other hand, takes into consideration the
number of stimuli. "Sometimes the variety is great and every task seems to
be a new one demanding the institution of search behavior of some
magnitude (whether analyzable or unanalyzable)." A problem/opportuni-
ty state may be fairly analyzable even though a variety of stimuli must be
taken into consideration (i.e., high variability) and vice versa. In the pres-
ent research, the routineness of problem/opportunity states dimension
was analyzed in terms of the variability of the stimuli (item 1 below),
analyzability of the stimuli (item 2 below), and the amount of discrepancy
between environmental demands and the organizational unit's capacity
(item 3). The latter notion is akin to Duncan's (1970) concept of degree of
perceived influence over the environment. The lesser the discrepancy be-
tween environmental demands and the organizational unit's capacity, the
greater the perceived influence over the environment and the greater the
ability to resort to routine procedures in handling the problems/oppor-
tunities that arise in the focal unit.
The routineness of problem/opportunity states dimension thus was
measured by collecting information as follows. (1) The CEO was asked to
enumerate the frequence with which the focal unit is able to resort to each

1979 Tung 685
of four decision procedures (ranging from highly routine to nonroutine) to

arrive at decisions or recommendations. The score on this question was
obtained by calculating the frequency of routine procedures. Thus, if a
respondent replied by assigning 50 percent to procedure A ("relied on
routine/standardized procedures which had been used successfully in the
past") and 10 percent, 30 percent, and 10 percent, respectively, to pro-
cedures B ("made incremental adaptation from existing procedures
easily"), C ("made step-by-step modifications to existing procedures with
difficulty"), and D ("no cut-and-dried method for dealing with the prob-
lem"), his frequency count for routine procedures would be 60 percent
(summation of frequency counts for procedures A and B). In order to
make summation easy with scores obtained on the other two variables, the
frequency count was converted to a 5-point scale by dividing the frequency
count by 20. Thus, the same respondent would receive a scaled routine
score of (60 .-20) = 3. The higher the scaled routine score, the greater the
reliance on routine procedures in that particular department. (2) An in-
vestigation of the amount of search effort (e.g., establishment of task
force, hiring consultants, number of man-hours spent) undertaken by the
focal unit to gain critical information to clarify the decision problem at
hand. Each respondent indicated the number of task forces that were set
up in his department. These were rank-ordered and split into five even
categories. A department receiving a score of 5 engaged in very few or no
task force efforts, i.e., the nature of its work was highly routine and no
elaborate task force was necessary to solve new problems/opportunities.
The responses to the parts pertaining to "outside help" and "number of
man-hours spent" were scored in a similar manner. (3) The CEO was
asked to indicate the extent to which his department measures up to the
demands made by both routine and nonroutine problems, in terms of
knowledge, capital, and other physical/material resources, including per-
sonnel. In order to come up with an overall "ability to measure up to
demands" score, the subject's response to the pertinent question regard-
ing routine problems (a scale of 1 to 5) was multiplied by the scaled fre-
quency of routine procedures index (calculation of this index was ex-
plained above) and then added to the response to the similar question on
nonroutine problems multiplied by the scaled frequency of nonroutine
procedures index. This sum was then divided by 5 to end up with a 5-point
scale ranging from "1 = unable to measure up to demands" to "5 = able to
measure up to demands." The formula could thus be written as:
/Scoreon ~coreon Scaled\
f ability to Scaled a
ability to lfequency \
measure up frequency measure up of
to demands of routine + to demands o i
made by procedures by poeue
routine score procedures
Overall Ability problems roblems score
to Measure up = -4'
to Demands 5

Thus, if a respondent checked 5 and 4 to questions on routine and nonrou-

tine problems, respectively, and his scaled frequency of routine proce-
dures score was 3.5 and nonroutine procedures was 1.5, his "overall abil-
ity to measure up to demands" score would be [(5)(3.5) + (4)(1.5)]/5 = 4.7.
The higher the score, the greater the ability to meet up to demands made
by both routine and nonroutine problems.
The scores on the three variables were then correlated to determine
whether they could be added to form a routineness dimension. Given the
high correlations among the three variables (see Table 1), they were com-
bined and then averaged to form a routineness dimension.
Operationalization of Perceived Environmental Uncertainty
Duncan's (1972) operationalization of the perceived environmental

uncertainty construct was adapted for use in this study. The merits of
Duncan's measures lie in its operationality and its ability to embrace
dimensions from both the macro and micro definitions of the concept.
The three components making up or contributing to the decision maker's
perception of environmental uncertainty are: (1) lack of information re-
garding environmental factors, (2) not knowing the outcome of a specific
decision, and (3) not being able to assign probabilities. These scores on the
three components comprising uncertainty were calculated according to the
formulae suggested by Duncan (1972). These scores were correlated to de-
termine whether they could be added to form a single dimension. Given
the high correlations (see Table 1), they were combined and then averaged
to form an overall uncertainty index ranging from 1 through 5. A score of
5 indicates high certainty; a score of 1 indicates high uncertainty.
Operationalization of Organizational Characteristics
Departmental structure was defined and measured in terms of the

degree of standardization (Hage & Aiken, 1967), formalization, role
specialization (Pugh et al., 1969), and the degree of decentralization in
decision making (Taylor & Bower, 1972). These variables were scored ac-
cording to the formulae suggested by the developers of the respective in-
struments. The scores on these variables were correlated to determine
whether they could be added to form a single dimension. Given the high
correlations (Table 1) among the variables, they were combined and then
averaged to form an overall departmental structure score that ranged from
1 through 5. A score of 5 indicates a highly mechanistic structure; a score
of 1 indicates a highly organic structure.
The time perspective taken in planning variable was tapped by asking
the respondent to indicate on a 5-point scale (ranging from less than one
year to more than four years) the time perspective adopted by his depart-
ment in planning future policies and goals to be pursued by the depart-
ment. A score of 5 indicates a long ranging planning perspective; a score
of 1 indicates a short ranging planning perspective.

1979 Tung 687
The frequency of changes/modifications to existing policies and pro-

grams variables was measured by asking the respondent to indicate on a
5-point scale, ranging from 1 = "Very seldom (changes to less than 20 per-
cent of the original plans)" to 5= "Very often (changes to more than 80
percent of the original plans)," the frequency of changes to existing
departmental plans and programs over the lifetime of such policies and
programs.
RESULTS
Initial Considerations
Initial attention focused on the reliability of the instruments. Because

the complexity index was calculated on the basis of response to a single
question, no interitem analysis could be performed. The change rate index
was computed by multiplying the frequency of change by the magnitude
of change. Thus this index, also, did not lend itself to interitem analysis.
Interitem reliability coefficients for the remaining dimensions and sub-
dimensions (stability of change rate, routineness of problem/opportunity
states, perceived environmental uncertainty, and departmental structure)
were calculated. Reliabilities ranged from .68 to .98. The correlation
matrices, Cronbach's coefficient alphas (which were used as indices of
homogeneity), and ri(est) (a reliability coefficient that is independent of test
length) (Cronbach, 1951) are presented in Table 1.
The items that comprise the various dimensions of organizational en-
vironments were subjected to principal components analysis to assist in
determining the underlying structure of the data. After experimenting
with various factor patterns and different methods of rotation, it was
found that the 3-factor solution obtained under direct oblimin oblique
rotation was most clear. The three factors that were derived on an em-
pirical basis were (1) complexity, (2) change rate, and (3) routineness of
problem/opportunity states. The items that were developed to measure
the stability of change dimension loaded highly on the items that were
used to measure the routineness of problem/opportunity states dimension
(loadings ranged from .75 to .89). Consequently, the items comprising
these two dimensions were combined and then averaged to form a new
routineness of problem/opportunity states dimensions. This new dimen-
sion was used in all subsequent analysis.
An investigation of the items comprising the stability of change and the
original routineness of problem/opportunity states dimensions suggests
that the high correlation between these dimensions is not surprising. The
items in the stability of change dimension seek to identify the frequency
with which new and different elements have to be taken into consideration
in decision making, and the predictability of such changes. If the internal
and external environments are stable, i.e., if the elements that have to be
taken into consideration in decision making remain relatively constant and
fixed over time, and if the organizational unit possesses a high degree of

TABLE 1
Correlation Matrices and Coefficient Alphas for Environmental Dimensions,
Perceived Environmental Uncertainty, and Departmental Structure
Stability of Change Rate Subdimension

Contend with Adequacy of Knowledge
Same Factors Warning Period About Events
Contend with
same factors 1.0000
Adequacy of
warning
period 0.8780* 1.0000
Knowledge
about events 0.7772* 0.8645* 1.0000
Coefficient alpha = .94; r7 = .84
8
ij(est)=
Routineness of Problem/Opportunity States Dimension

Routineness Extent of Measure up
of Procedures Search Effort to Demands
Routineness of
procedures 1.0000
Extent of
search effort 0.9297* 1.0000
Measure up
to demands 0.9328* 0.8479* 1.0000
Coefficient alpha =.96; rF -.888
ij(est)=
Perceived Environmental Uncertainty

Lack of Not Knowing Unable to Assign
Information Outcome Probabilities
Lack of
information 1.0000
Not knowing
outcome 0.7011 *1.0000
Unable to
assign
probabilities 0.6763* 0.9806* 1.0000
Coefficient alpha =.91; r.ij(est)=77
Departmental Structure
Specialization Standardization Formalization Participation
Specialization 1.0000
Standardization 0.8167* 1.0000
Formalization 0.7572* 0.9192* 1.0000
Participation 0.8145* 0.9060* 0.8781* 1.0000
ij(est)== .82
Coefficient alpha = .95; rF 8
*=p<.001
knowledge as to what to expect, coupled with a reasonably long and ade-

quate warning period, the unit under investigation could more easily (and
therefore is more likely to) resort to routine procedures in its operations
and functions. In short, the stability of change determines the organiza-
tional unit's ability or inability to resort to routine procedures.

1979 Tung 689
Analysis of Major Findings
To test the relationshipsbetween environmentalcharacteristics,per-

ceived environmentaluncertainty,and the three organizationalvariables,
regressionanalyseswereperformed.All the coefficientsweresignificantat
the .005 level with the exceptionof those obtained when complexityand
routinenessdimensionswere regressedagainst time perspectivetaken in
planning.(See Table 2.) Changerate was found to be the most important
single contributorto variationsin perceivedenvironmentaluncertainty,
time perspectivetaken in planning, and frequencyof changes to plans.
Complexitywas found to havethe most significantimpacton variationsin
departmentalstructure.
TABLE 2
Stepwise Multiple Regression: Environmental Characteristics
Against Perceived Environmental Uncertainty and Organizational
Variablesa
R2 Complexity Change Rate Routineness

Perceived .70776 -.3407 -.5649 .1766
environmental (.6825) (18.828) (48.009) (5.341)
uncertainty <.005 > <.005 > <.005 >
Structure .48956 -.4224 -.2611 .2506
(.4456) (16.571) (5.872) (6.157)
<.005 > < .005 > < .005 >
Time perspective .22015 .0651 -.3270 .1784
(.1529) (.258) (6.030) (2.043)
<N.S.> <.005> <N.S.>
Frequency of .66216 .2537 .6082 -.1586
changes to (.6639) (9.036) (48.136) (3.728)
plans < .005 > <.005 > <.005 >
aFigures presented in parentheses under R2 column are Al. Figures without parentheses are the
standardized regression coefficients, figures in parentheses are the F values, and figures within
pointed brackets are the significance levels.
N.S. = not significant.
Becausethere were minor correlationsamong the three organizational

variables,multivariateregressionwas performedon the same set of in-
dependentand dependentvariablesas a check againstthe resultsobtained
from stepwisemultipleregression(reproducedin Table 2). The standard-
ized regression coefficients, t statistics, and significance levels from
multivariateregressionare presentedin Table 3. The resultsobainedfrom
multivariateregressionand stepwisemultipleregressionwerefairlyconsis-
tent. These resultsprovidedjustificationfor the use of regressioncoeffi-
cients obtained from multiple regression to test the hypotheses in-
vestigatedin the study.
To test Hypotheses1 through8, analysisof covariancewas performed.
Perceived environmental uncertainty and the three organizational
variablesstudied varied significantlyacross all eight cells (p<.005). The

690 Academyof ManagementJournal December
TABLE 3
Multivariate Regression Analysis: Environmental Characteristics
Against Organizational-Variablesa
Complexity ChangeRate Routineness

Structure -.424 -.253 .065
(4.06) (3.00) (.51)
<.001 > <.004> <.614>
Time perspective 250 -.158 .173
(2.46) (1.93) (1.38)
<.071 > <.059> <.146>
Frequency of .256 .609 -.330
changes (2.37) (6.96) (2.48)
<.021> <.001> <.172>
aFigures without parentheses are the standardized regression coefficients, figures in parentheses
are the F values, and figures within pointed brackets are the significance levels.
means scores for perceived environmental uncertainty, departmental

structure, time perspective taken in planning, and frequency of changes to
plans are presented in Figure 1.
An examination of the means scores on perceived environmental uncer-
tainty and the three organizational variables for the different cells in the
8-cell design showed that the scores on perceived environmental uncertain-
ty, structure, and frequency of changes to plans varied in the predicted
fashion acrossall eight cells (p c .005). The mean scores on time perspec-
tive taken in planningdeviatedfrom the predictedfashion in certaincells,
most noticeablyin cell #4. This deviationcould be attributedto one of two
reasons: (1) There was a small numberof cases in the cell. (2) Although
the organizationalunits studied were autonomous in their functions and
activities, departmentalplans-more specifically,formalizeddepartmen-
tal plans-usually were coordinatedat the corporatelevel. Hence support
was found for Hypotheses 1 through 4, and only partial support was
found for Hypotheses5 through8.
The small n in several of the cells is recognized as a limitation in the
study. This limitationarises from the lack of availabilityof subjectsthat
met the criteriafor inclusion in the study. However, it should be recog-
nized that the total number of units studied, 64, was a fairly sizeable
numbSr Moreover,the unbiasedestimateof populationmultiplecorrela-
tion (R2) was calculated to estimate the shrinkage in going from a sample
of a given size to an infinitely large sample. These data are presented in
Table 2.
CONCLUSION AND DISCUSSION
The first and principal finding of the study is that it is possible both to
conceptualizeand to operationalizeorganizationalenvironmentsin terms
of more than two dimensions.It has been shown that it is indeedpossible
to define and analyze the environment in terms of three dimensions. These

1979 Tung 691
threeenvironmentalcharacteristicswereshownto be significantpredictors
of variationsin perceivedenvironmentaluncertainty,departmentalstruc-
ture, time perspectivetaken in planning, and frequency of changes to
plans.
It is believedthat the resultsof this researchprovide a significantim-
provement over the 4-cell typologies heretofore available. A more
elaborate typology of organizationalenvironmentscan assist organiza-
tional theorists, researchers,and practitionersto distinguishmore clearly
and to identifythe problemsconfrontingorganizationalunits operatingin
different environments.A more refined and expanded typology could
assistin the generationof more specificand sophisticatedhypothesescon-
cerning the relationships between environmental and organizational
variables,which subsequentlycould be tested in the field. The research
reportedhereis just a step towardsa seriesof more detailedinvestigations
and analyses of styles and patternsof people interaction, organization-
people interaction,and organization-organization interaction.Resultsof
such analyseshave widespreadimplicationsfor organizationaltheoryand
behavioralresearch.
Second, the findingsof this study about the relationshipsbetween en-
vironmentaland organizationalcharacteristicsare in line with those ob-
tained by other researchers of organization-environmentinteraction
(Lawrence& Lorsch, 1967; Duncan, 1972). This study has shown that
changerate has the singlegreatesteffect on the variationin perceiveden-
vironmentaluncertaintyand that departmentalstructure,time perspective
taken in planning, and frequency of changes to plans do vary among
departmentslocated in different environments.Although this study did
not explicitly examine what impact the "fit" between organizationen-
vironmentalcharacteristicsand organizationstructuralvariables would
have upon the effectiveness of the organization, the notion of effec-
tivenesswas implicitin the selectionof the sample. All the organizations
selectedfor study were high performersin termsof returnon investment.
Thus, this studypoints to the importanceof achieving"fits" betweenen-
vironmentaland organizationalvariablesto ensurethe long run survival
of the organizationalunit understudy. It points to the need for organiza-
tions-or, more specifically, organizationalunits-to identify correctly
the environmentin whichthey are operating.It signifiesthe importanceof
gatheringintelligenceon any changesthat may take place in the environ-
ment so that strategiesand techniquesmay be developedfor coping and
dealingeffectivelywith such environmentaldemandsand constraints.
The findings of this study have widespreadimplications for future
researchon organizationsand organizationaltheory. A morerefinedbasis
for differentiatingbetween organizationalenvironmentscan lead to the
developmentof a bettercore typologyof organizations.Basedon a critical
reviewof existingtypologiesand the resultsof his own empiricalresearch,
Hall (1972) concluded that because organizationsdo not operate in a
vacuum,any comprehensiveframeworkfor classifyingorganizationsmust

take into considerationthe "array of externalconditions" under which

the organizationoperates.
In addition, a more comprehensivetypology of organizationalen-
vironments could lead to the development of a more satisfactory
frameworkfor analyzingor assessingorganizationaleffectiveness.This is
in line with some of the latest researchin the area of organizationaleffec-
tiveness. Steers (1977) pointed to the futility of any approachwhich tries
to assessorganizationaleffectivenesswithina unidimensionalframework.
He advocates the use of "multivariate effectiveness measures" and
specifies environmental characteristicsas one of the major sets of
variables for analyzing organizationaleffectiveness. The availabilityof
more complex analytic proceduresfor viewing the environment,as sug-
gested here, can help in this endeavor, thereby leading to a greater
understandingof the organization-environment interface as it relates to
organizationaleffectiveness.
REFERENCES
1. Anderson, C. R., & Paine, F. T. Managerial perceptions and strategic behavior. Academy of
Management Journal, 1975, 18, 811-823.
2. Burns, T., & Stalker, G. M. The management of innovation. London: Tavistock Publishers,
1961.
3. Child J. Organizational structure, environment and performance-The role of strategic choice.
Sociology, 1972, 6, 1-22.
4. Cronbach, L. L. Coefficient alpha and the internal structure of tests. Psychometrika, 1951, 16,
297-334.
5. Downey, H. K., & Slocum, J. W. Uncertainty: Measures, research and sources of variation.
Academy of Management Journal, 1975, 18, 562-578.
6. Duncan, R. B. The effects of perceived environmental uncertainty on organizational decision
unit structure: A cybernetic model. Unpublished Ph.D. dissertation, Yale University, 1970.
7. Duncan, R. B. Characteristics of organizational environments and perceived environmental
uncertainty. Administrative Science Quarterly, 1972, 17, 313-327.
8. Emery, F. E., & Trist, E. L. The causal texture of organizational environments. Human Rela-
tions, 1965, 18, 21-31.
9. Haas, J. E., & Drabek, T. E. Complex organizations: A sociological perspective. New York:
MacMillan Co., 1973.
10. Hage, J., & Aiken, M. Relationships of centralization to other structural properties. Ad-
ministrative Science Quarterly, 1967, 12, 72-92.
11. Hall, R. H. Organizations: Structure and process. Englewood Cliffs, N.J.: Prentice-Hall, Inc.,
1972.
12. Inkson, J. H. K., Pugh, D. S., & Hickson, D. J. Organization context and structure: An ab-
breviated replication. Administrative Science Quarterly, 1970, 15, 318-329.
13. Jurkovich, R. A core typlogy of organizational environments. Administrative Science Quarterly,
1974, 19, 380-394.
14. La Porte, T. R. Organizational response to complexity: Research and development as organized
inquiry and action. Part 1. Berkeley, Cal.: University of California, 1971. Working Paper #141.
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integration. Homewood, Ill.: Richard D. Irwin, 1967.
16. Miles, R. E., Snow, C. C., & Pfeffer, J. Organization-environment: Concepts and issues. In-
dustrial Relations, 1974, 13, 244-264.
17. Osborn, R. N., & Hunt, J. G. Environment and organizational effectiveness. Administrative
Science Quarterly, 1974, 19, 231-250.
18. Perrow, C. Organizational analysis: A sociological view. Cal.: Wadsworth Publishing Co., Inc.,
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1979 Tung 693
19. Pugh, D. S., Hickson D. J., Hinings, C. R., & Turner, C. The context of organizational struc-
tures. Administrative Science Quarterly, 1969, 14, 91-114.
20. Simon, H. A. The new science of management decisions. New York: Harper & Row, 1960.
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22. Taylor, J. C., & Bower, D. G. Survey of organizations: A machine-scored standardized question-
naire instrument. Ann Arbor, Mich.: University of Michigan, 1972.
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25. Weick, K. E. The social psychology of organizing. Reading, Mass.: Addison-Wesley, 1969.
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1965.


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Dimensions of Organizational Environments: An Exploratory Study of Their Impact on

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This study sought to (1) develop a comprehensive

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of four primarycells in the absenceof a more comprehensivetypology.

For purposes of operationalizationand measurement,a distinction

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of these factors and components comprisingthe environmentcould be

Low Complexity High Complexity

Previous researchon organization-environment interactionhas shown

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As used in this study, environmentalcomplexityrefers to the number

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Hypothesis3: A CEO operatingin an organizationalunit located

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adaptationto changingenvironmentalconstraintsand demands.An alter-

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greaterexpertisein a particularfield would help reduce the amount of

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The complexity and routinenessdimensionsin conjunction were hy-

The majorfocus of this studyis the environmentfaced by departmental

SampleSelectionand Data Collection

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employeeswas used as a cutoff point; or (b) assetsof parentcompany;or

The three environmentaldimensions used in this study were opera-

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manageabilityinto the simple-complexindex requireda determinationof

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1972; Duncan, 1972; Osborn & Hunt, 1974). It is important to distinguish

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on top of the new marketing strategies adopted by his competitors in the

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of four decision procedures (ranging from highly routine to nonroutine) to

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Thus, if a respondent checked 5 and 4 to questions on routine and nonrou-

Operationalization of Perceived Environmental Uncertainty

Duncan's (1972) operationalization of the perceived environmental

Operationalization of Organizational Characteristics

Departmental structure was defined and measured in terms of the

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The frequency of changes/modifications to existing policies and pro-

Initial attention focused on the reliability of the instruments. Because

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Stability of Change Rate Subdimension

Routineness of Problem/Opportunity States Dimension

Perceived Environmental Uncertainty

knowledge as to what to expect, coupled with a reasonably long and ade-

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Analysis of Major Findings

To test the relationshipsbetween environmentalcharacteristics,per-

R2 Complexity Change Rate Routineness

Becausethere were minor correlationsamong the three organizational

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Complexity ChangeRate Routineness

means scores for perceived environmental uncertainty, departmental

CONCLUSION AND DISCUSSION

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take into considerationthe "array of externalconditions" under which

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