Converting to For-Profit Status: Corporate Responsiveness to Radical Change

Abstract

This study examined organizational adaptation to a radical environmental shift—a dramatic change in federal policies toward health maintenance organizations (HMOs) that removed key advantages of nonprofit status. To understand why some nonprofit HMOs responded more quickly than others in converting to for-profit status, we tested an inertial, an adaptive, an institutional, and an integrated model, using event-time analysis. Results indicate that age, the tightness of system coupling, physician case load, and market saturation lengthen response time and national chain membership, federal qualification, and supportive state legislation shorten it. Although variables from each of the models contributed to the explanation of response times, only the integrated model fit the data well. This study thus points to the complementarity of the three perspectives and underscores the need for an integrative approach to the study of organizational transformation.