Strategic Responses of Taiwanese Enterprises to the New Labor Pension Act: On the Relationship between Technical and Institutional Concerns
Date Issued
2016
Date
2016
Author(s)
Hsu, Chen-Hao
Abstract
In order to improve old age security in Taiwan, a new labor pension system has been launched since July 1, 2005. While its significant impact on individual labor’s welfare has been widely discussed, there is little research about how firm managers thought about and responded to this institutional change. Drawing on perspectives of New Institutionalism and the Resource Dependence theory, this research identified a number of technical and institutional determinants of firms’ strategic responses to the labor pension reform. In addition, by considering the degree of institutionalization pressures in organizational fields, this research also discussed the potential change of firms’ concerns about their responsive behaviors. Hypotheses are tested with survey data consist of 114 Taiwanese firms. The results showed that organizations which were more constrained by the institutional demands tended to consider more on cost-effectiveness yet less on normative legitimacy while they were responding to the pension system reform. On the other hand, if organizations valued internal labors’ opinions, or already had labor pension practices more consistent with the new institutional requirements, they were more likely to adopt legitimate human resource strategies. Since there were different concerns about cost-effectiveness and normative legitimacy in each company, multiple and heterogeneous responsive practices were adopted after the new labor pension reform. Furthermore, our empirical results indicated that the underlying motivation of strategy adoption could be different among groups facing different degrees of institutionalization pressures. I found that stronger awareness of prevalent strategies could amplify managers’ emphases on cost-effectiveness, while at the same time enhance the importance of normative legitimacy in firms’ strategic decisions, especially in the case of adopting talent maintenance practices. For the “followers,” which was a group of companies more aware of the prevalent strategies in their industry, the positive effect of cost-effectiveness on their propensity to adopt performance management plans, talent maintenance plans, and layoff strategies was significantly lower than those who did not follow other companies’ actions. Overall, it appears that investigating the New Labor Pension Act through an organizational perspective can provide us fruitful insights into its impacts on the whole labor market. Our findings indicate that firms’ technical and institutional concerns should not be conceived of as representing two different ends of a continuum, but rather complementary factors corresponding to multiple kinds of strategies in organizational fields. Future research should also consider pressures related to institutionalization as potential contingencies in the relationship between organizations’ perceptions and their final reactions toward an environmental change.
Subjects
the New Labor Pension Act
responsive strategy
organization theory
New Institutionalism
Institutionalization
Type
thesis
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