| Abstract: | Firms in transition economies experienced a large exogenous shock in their external business environment in the late 1980s when these economies moved from a socialist‐oriented economic environment to a more market‐oriented economic environment. This paper examines the following research question in the context of this change: What are some factors that influence transition economy firms to successfully change their operating know‐how or knowledge sets to reflect the demands of their new environment? Building on some core ideas from literature on organizational imprinting, knowledge‐based view of the firm, and firm search, we suggest that two factors have a profound impact on a firm's ability to change. The imprinting effect of firms' prior socialist institutional and market environment adversely impacts their ability to change their operating knowledge. At the same time, firms that search for new knowledge from distant sources (located in mainly non‐socialist countries) are able to successfully change their knowledge to meet the demands of the new market‐oriented economy. Both of these aspects also have joint interdependent effects on the success of change; distant search mitigates some of the adverse impact of socialist market imprinting, but that is not the case for the impact of socialist institutional imprinting. These findings have interesting implications for both researchers and practitioners involved in transition economy settings. Copyright © 2006 John Wiley & Sons, Ltd. |
