Institutional Context and Organizational Structure

1. Imprinting

Stinchcombe (1965) was the first theorist to call attention to the strong influences of social (including institutional) conditions present at the time of its founding on the structural form of an organization. He argued that “the organizational inventions that can be made at a par- ticular time in history depend on the social technology available at the time” (p. 153). It is for this reason that organizations of the same type are founded in “spurts” followed by relatively slower growth. These organizations tend to exhibit similar structural characteristics, to be of roughly the same size, and to exhibit similar occupational and labor force characteristics. For example, new universities were founded in the United States mainly from 1870 to 1900, and those arriving either earlier or later were likely to exhibit different forms (p. 154). Of even more interest, the structural features adopted by organizations during the founding period are highly stable, tending to persist over long periods of time. In this sense, organizations are “imprinted” with the characteristics present at the time of their founding. The primary expla- nation for organizational imprinting is that of path dependence, the increasing returns associated with continuing in the same direction and the costs associated with developing alternative approaches (see Chapter 6). Moreover, as more organizations of the same time are created, their cognitive legitimacy increases (Carroll and Hannan 1989), so that their structural templates are reinforced.

These arguments have recently been extended to examine continu- ities in organizational forms created within a given societal context. Entire political economies have been observed to reflect particular configurations of beliefs, norms, and rules that persist over time and tend to shape both the types of organizations established and the ways in which they relate to one another. Thus, Whitley (1992b; 1999) has examined differences among societies in their prevailing “business recipes,” their typical ways of structuring internal firm organization, relations among firms, and relations between firms and political authorities, and documents the persistence of these diverse arrange- ments over time. And Hall and Soskice (2001b) examine the persistence of differences in the ways in which societies structure and govern their market economies, with some countries favoring a “liberal” mode rely- ing on arm’s-length exchange of goods and services, whereas others opt for a more “coordinated” approach in which political authorities play a larger role. These divergent “varieties of capitalism” tend to persist over long periods of time, resisting the homogenizing pressures of globalization.

Schneiberg (2007) challenges those who would attempt to charac- terize entire societal systems in terms of their central institutional ten- dencies, pointing out that alternative forms of organizing often coexist within societies and their sectors and may persist over time. Noting that most accounts of U.S. industrial development stress the domi- nance of large firm, mass production, and for-profit corporations, he points out that across several industries and in several states, alterna- tive cooperative or state-owned enterprises developed, were success- ful, and have been reproduced over time. Ranging from state-owned electric utilities to cooperative organizations in dairy, grain, and other agricultural sectors, to mutual insurance companies, these types of organizations flourished in many midwestern states from the 1830 to the 1920s. The existence and persistence of these alternative forms is explained by the success of the actions of a variety of religious and social movements, including the Populist Party and the Grange, that challenged dominant economic and political groups to carve out a space for more communal forms.

While earlier discussions viewed organizational imprinting as a relatively determinant, top-down process, these more recent treat- ments emphasize the role of active agents who shape the paths along which development occurs. Like Schneiberg, Johnson (2007) stresses the role of social and cultural entrepreneurs who piece together particu- lar combinations of the social resources provided by macro-level condi- tions. Her analysis of the imprinting process that gave rise to the Paris opera stresses the creative bricolege required to create the hybrid form combining a royal charter’s academic form with a commercial theatre model. She points out that an actor-based approach to organizational imprinting . . . calls for attention to the sequence and character of key moments in the founding processes and offers a corrective to the telescoping of founding processes into “founding conditions” typical of many ecological and some entrepreneurship studies. (p. 118)

Other studies emphasize the importance of founding entrepre- neurs who actively shape the structure and strategy of the firms they found. For example, Boeker (1989) studied factors affecting the insti- tutionalization of power differences present at the time of founding in a sample of 53 semiconductor companies. Boeker contrasts the impact of entrepreneurial and environmental effects present at the time of the firm’s founding on current firm strategy. He found that the previous functional background of the entrepreneur influenced the selection of the firm’s strategy, but also that this decision was independently influ- enced by the industry’s stage of development at the time the firm was founded. Firm strategies were significantly impacted by industry stage in three of the four stages examined. For example, firms founded during the earliest era were more likely to embrace and continue to pursue first-mover strategies, whereas firms founded during the most recent period studied were more likely to develop and to pursue a niche strategy.

Cultural models of organizing precede the creation of organiza- tions. Most organizational fields present not a single, but a (limited) number of organizational models or archetypes. Research by Baron, Hannan, and Burton (1999) assessed the types of models or blueprints governing employment practices present in the mind of the founding CEOs in a sample of start-up firms engaged in computer hardware, software, and semiconductors in Silicon Valley. Examining the charac- teristics of these firms after their first few years of operation revealed that companies whose CEOs held a more bureaucratic conception of employment practices were more likely to exhibit higher managerial intensity (proportion of managers to full-time employees) than compa- nies whose CEOs valued more egalitarian “commitment” models.

Environmental Complexity

Gradually, both theorists and researchers have come to realize that, although organizations confront and are shaped by institutions, these institutional systems are not necessarily unified or coherent. More generally, with the arrival of open system perspectives in the 1950s, organization theorists gradually shifted attention to not only the orga- nization within an environment but the organization of the environment. Scholars such as Dill (1958), Emery and Trist (1967), Pfeffer and Salancik (1978), and Thompson (1967/2003) attempted to identify abstract dimensions along which organizational environments might vary, including amount of homogeneity-heterogeneity, stability-variability, extent of connectedness, and degree of munificence-scarcity of resources. However, these dimensions proved difficult to assess empir- ically and did not take into account the varying location or position of organizations operating within the “same” environment.

Many of these problems became more tractable as researchers recognized that environments vary greatly depending on type of organization: We began to focus attention on more discrete contexts such as the particular sector or field within which the organization was operating. I devote Chapter 8 to discussing more fully the con- cept of organization field and to research conducted at this level. Here I call attention to two different but potentially compatible foci of research on environmental complexity: relational structure and insti- tutional logics.

Relational Complexity

In developing our approach to the analysis of “societal sectors,” Meyer and I wished to call attention to the effects on organizations of the wider relational systems within which they were embedded. Prior research had concentrated on local exchanges among organizations in the same community (e.g., Warren 1967), whereas we emphasized the importance of nonlocal and vertical ties, for example, the connections of local schools to district and state systems, or the ties of local banks to corporate headquarters and regulatory agencies (Scott and Meyer 1983). We identified a number of variables, such as centralization of decision making and fragmentation of the decision-making structure— among authorities at the same or differing levels and among types of decisions (e.g., programmatic vs. funding)—arguing that organiza- tions operating in more complex and fragmented systems were more likely to develop more complex and elaborated internal administra- tive structures, holding constant the complexity of their work pro- cesses. Powell (1988) found evidence consistent with this prediction in his study comparing a scholarly book publishing house and a public TV station. He concluded that “organizations, such as [the public tele- vision station] WNET, that are located in environments in which con- flicting demands are made upon them will be especially likely to generate complex organizational structures with disproportionately large administrative components and boundary-spanning units” (p. 126). And Meyer, Scott, and Strang (1987) employed data on the administra- tive structure of districts and elementary and secondary schools to demonstrate that schools and districts depending more on federal funding, which involves many independent programs and budgetary categories, had disproportionately large administrative structures compared to schools relying primarily on state funding, which tended to be more integrated.

This research stream was pursued by Scott and Meyer (1987) and has been revived by Pache and Santos (2010), who consider the com- bined effects of fragmentation and centralization to suggest that the highest level of complexity for organizations is created by high frag- mentation combined with moderate centralization. Such conditions are exemplified by scientific and professionally dominated organizations dependent on federal, state, and private funding, for example, arts organizations such as museums (Alexander 1996) and symphony orchestras (Glynn 2000), drug abuse treatment centers (D’Aunno, Sutton, and Price 1991), health care organizations (Scott et al. 2000), and biotechnology firms (Powell 1999). How organizations respond to such conditions is considered below.

Cultural Conflict

With the appearance of Friedland and Alford’s influential essay in 1991, institutional scholars have attended increasingly to another, related facet of environmental complexity: conflicts in the cultural prescriptions available to guide and motivate organizational actions. As discussed in Chapter 4, such conflicts were seen as residing in “potentially contradictory interinstitutional systems,” such as political, economic, or religious prescriptions. Interest in this topic has rapidly grown, as evidenced by the empirical and theoretical work of Thornton and colleagues (Thornton 2004; Thornton, Ocasio, and Lounsbury 2012) and by the review article by Greenwood and associates (2011), who discuss some 40 empirical studies conducted since 1991. Greenwood and colleagues point out that these studies vary in (1) the multiplicity of logics considered (are there more than two?), as well as (2) the degree to which such logics are incompatible (p. 332). Related to the latter difference is a variety of potential areas of disagreement, for example, over goals, means, appropriate material resources, appropri- ate human resources, the control of work, or the definition of organiza- tional boundaries (Meyer and Scott 1983a: 204). Among the major types of conflicting logics examined have been various modes of artistic or aesthetic logics versus commercial logics (e.g., Jones and Thornton 2005; Lampel, Shamsie, and Lant 2006), various modes of professional logics (editorial, legal, medical) versus market logics (e.g., Brock, Pow- ell, and Hinings 1999; Greenwood and Suddaby 2006), varying styles of business logics (collectivist vs. corporate; Haveman and Rao 1997), and conflicting cultural logics confronting multinational corporations operating in diverse countries (Seo and Creed 2002; see also Chapter 8). Of course, a major issue posed for organizations operating in con- flicting environments is how to secure and maintain their legitimacy. In an early formulation, Meyer and I suggested that “organizational legitimacy refers to the degree of cultural support for an organization— the extent to which the array of established cultural accounts provide explanations for its existence, functioning, and jurisdiction, and lack or deny alternatives” (Meyer and Scott 1983a: 201). A pluralistic, con- flicted environment thus poses a major challenge for organizations in such contexts.

2. Organizational Responses to Complexity

The next section presents more general types of responses made by organizations to institutional demands, but here I concentrate par- ticularly on responses to conflicting environmental prescriptions. Kraatz and Block (2008) provide a helpful classification of possible responses, including attempts (1) to eliminate or neutralize some of the demands made on them; (2) to compartmentalize, with different, loosely coupled subunits managing one or another set of demands, or by responding sequentially to them; (3) to “balance” disparate demands, playing constituencies off against each other; and (4) to embrace a hybrid or composite model, “forging a durable identity of their own, and to emerge as institutions in their own right” (p. 251). This latter alternative builds on Selznick’s views that some organiza- tions, under appropriate leadership, can craft their own identity around a distinctive set of value commitments (see Chapter 2). It also addresses the problem confronting every organization in its search for legitimacy: how to meet the changing demands of external constituen- cies while at the same time maintaining its commitments to its core values, being a “hostage to [its] own history” (Selznick 1992: 232).

Environmental forces induce changes not only by stimulating actions to redesign the structural features of organizations but by shap- ing the identities of organizations and their participants. As described in Chapter 5, some types of organizations successfully craft a recogniz- able identity that provides guidance to both participants and constitu- ents. Organization identity emphasizes those features of an organization that differentiate it from other members of the same population and can shape both internal priorities as well as repertories of possible responses (Albert and Whetten 1985; Dutton and Dukerich 1991; Greenwood et al. 2011; King, Clemens, and Fry 2011). Environmental forces also impinge on organizations by introducing new identities into the mix of participants or by altering the identities of current members (see Glynn 2008). In his research on the effect of the environmental protection movement on chemical and petroleum industries, for exam- ple, Hoffman (1997) describes the changes that occurred as these energy companies began to hire environmental engineers and, gradually, to include them in their decision-making processes. More generally, Greenwood and Hinings (1996) point out that an important component of institutional change is the way in which environmental forces shape internal organizational power processes, as new types of actors are added, or as current actors are undercut or empowered by changing circumstances.

Another lens for examining effects on organizations of conflicted environments is found in the research of Heimer and Staffen (Heimer 1999; Heimer and Staffen 1998). They provide a detailed qualitative study of decision making in neonatal intensive care units at two Illinois teaching hospitals, artfully combining institutional and decision- making ideas and arguments. They focus on the conflicts occurring among three institutional spheres: families concerned with the welfare of their infant children, medical providers, and legal authorities, including both state regulators and private attorneys. They observed that these institutional systems influenced organizational decisions at three levels: (1) by shaping general rules and procedures, (2) by shaping the elements affecting decisions, and (3) by affecting the inter- ests and relative power of the participants in the decision processes.

With respect to rules and procedures, many of the most fateful effects of legal and medical institutions occur in their impact on med- ical structures, including staffing patterns, mandated procedures, and documentation routines. While some of these features are ceremonial and may be decoupled from actual activities, many are hardwired and routinely enforced and enacted. In these respects many of the ways in which legal and medical institutions influence behavior in this setting are unobtrusive but pervasive. Civil law, for example, penetrates deeply into medical settings because medical insurers and risk manag- ers insist that quality assurance specialists be employed to monitor outcome statistics and to investigate unexpected incidents. To con- sider the “elements affecting decisions,” Heimer and Staffen employ Cohen, March, and Olsen’s (1972) well-known “garbage can” model, which stresses the importance of who has the right to participate and whether or not they are present, who is able to authoritatively deter- mine that a problem exists, who determines that a choice needs to be made, and who defines what an acceptable solution is. Considering these types of elements, medical personnel have a decided advantage since most of the decision situations occur in arenas controlled by them, and they are more likely to be present when a decision situation occurs. Medical personnel and state agents are “repeat players,” while families are “almost consummate novices, using unfamiliar decision tools on unfamiliar medical problems” (Heimer 1999: 44). Finally, the interests and relative power of participants reflect in general the advantages of advanced training and control of turf, although family members, especially mothers, can claim extraordinary rights to protect the interest of their child.

Source: Scott Richard (2013), Institutions and Organizations: Ideas, Interests, and Identities, SAGE Publications, Inc; Fourth edition.

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