Studies emphasizing institutional processes rather than effects, such as those described earlier, begin to suggest that organizations may not be quite so powerless or passive as depicted in earlier institutional accounts. Noting the oversocialized conception of organizations and the limited response repertoire proffered by early formulations—in effect, “Conform, either now or later!”—a number of scholars have joined voices in calling for more attention to power and agency, particularly on the part of individuals and organizations subject to institutional pressures (see DiMaggio 1988; Perrow 1986). Pfeffer (1981; Pfeffer and Salancik 1978) was among the first to emphasize that man- agers often manipulated symbols to “manage” their legitimacy in the larger environment.
In an important codification of these arguments, Christine Oliver (1991) called for an expansion of the choice set available to organiza- tions. Drawing on resource-dependence arguments, she outlined a broad range of potential responses, emphasizing throughout the pos- sible use of more self-interested, strategic alternatives.2 I begin by reviewing her arguments and typology. However, because they focus on responses by individual organizations, I conclude by pointing to the possibility of more collective strategic actions.
1. Individual Organizational Responses
Although it is useful to recognize that organizations can react to institutional pressures in a number of ways, it is also important to observe the extent to which institutional environments operate to influ- ence and delimit what strategies organizations can employ. Just as institutions constitute organizations, they also define and set limits on their appropriate ways of acting, including actions taken in response to institutional pressures. Strategies that may be appropriate in one kind of industry or field may be prohibited in another. For example, public agencies are frequently encouraged to coordinate services, whereas private organizations are expected to refrain from becoming overly cozy (or collusive). Tactics that can be successfully pursued in one setting may be inconceivable in another. In short, like other organiza- tional processes, organizational strategies are institutionally shaped.
Oliver (1991: 152), however, concentrates primarily on types of strategies that organizations can pursue irrespective of such field-level constraints. She delineates five general strategies available to individ- ual organizations confronting institutional pressures:
- Acquiescence or conformity is the response that has received the lion’s share of attention from institutional theorists.
As we have seen, it may entail either imitation of other organiza- tions selected as models or compliance to the perceived demands of cultural, normative, or regulative authorities. It may be motivated by anticipation of enhanced legitimacy, fear of negative sanctions, hope of additional resources, or some mixture of these motives.
- Compromise incorporates a family of responses that include bal- ancing, placating, and negotiating institutional demands.
Compromise is particularly likely to occur in environments con- taining conflicting authorities. Research by D’Aunno, Sutton, and Price (1991) describes hybrid programs devised by mental health agencies incorporating drug abuse programs. Although this may seem a special case, as I noted in Chapter 6, in liberal, pluralist societies like the United States, inconsistent and contested institutional frameworks are commonplace (Berman 1983). This implies that organizations will fre- quently find themselves in situations in which they have considerable room to maneuver, interpret, bargain, and compromise. For example, Abzug and Mezias (1993) detail the range of strategies pursued by organizations responding to court decisions regarding comparable worth claims under Title VII of the Civil Rights Act of 1972. The feder- alized structure of the court systems, permitting quasi-independent rulings by federal, state, and local courts, allowed a greater variety of appeals and also provided avenues for reform efforts to continue at one level if blocked at another.
Alexander (1996: 803) describes a combination of compromise strategies as being pursued by curators of fine arts museums in the United States, whose organizations increasingly rely on diverse fund- ing streams—wealthy individuals, corporations, governments, and foundations—each of which holds different goals in providing support. Alexander finds that curators, whose prestige “rests on the scholarliness and quality of their work, including the exhibitions they mount,” tend to alter the format of exhibitions to please their funders—for example, creating “blockbuster” and traveling exhibitions to please corporate and government sponsors—but to compromise less on the content of exhibitions. Other specific strategies employed included “resource shifting,” “multivocality” (sponsoring exhibitions with many facets that appeal to a variety of stakeholders), and “creative enactment” (inventing linkages between particular types of art and the specific interests of a potential sponsor).
- The strategy of avoidance, as defined by Oliver (1991), includes concealment efforts and attempts to buffer some parts of the orga- nization from the necessity of conforming to the requirement.
I described a range of these strategies earlier in the discussion of decoupling and loose coupling.
- The strategy of defiance is one in which organizations not only resist institutional pressures to conform, but do so in a highly public manner.
Defiance is likely to occur when the norms and interests of the focal organizations diverge substantially from those attempting to impose requirements on them. Covaleski and Dirsmith (1988) describe one organization’s attempt to defy the state’s efforts to impose a new bud- getary system on them. The University of Wisconsin system attempted to devise and obtain public support for an alternative budgetary sys- tem that would more clearly reflect their own interests in research and educational programs and retaining top-flight faculty. In the end, state power prevailed, and the university was forced to accept the state’s enrollment-based approach.
- Organizations may respond to institutional pressures by attempting to manipulate—“the purposeful and opportunistic attempt to co-opt, influence, or control” the environment (Oliver 1991: 157).
Numerous scholars, from Selznick (1949) to Pfeffer and Salancik (1978) to Alexander (1995), have examined the ways in which organi- zations attempt to defend themselves and improve their bargaining power by developing linkages to important sources of power. Of special interest to institutional theorists are the techniques used by organizations to directly manage views of their legitimacy. Elsbach and Sutton (1992: 702) report a process study of impression- management techniques employed by Earth First! and ACT UP, two militant reform organizations that employed “illegitimate actions to gain recognition and achieve goals.” Their analysis suggests that such techniques were employed to gain media attention to the organiza- tion and its objectives. Once such attention was forthcoming, spokes- persons for each organization stressed the more conventional aspects of the organization and attempted to distance their organization’s program from the illegal activities of some of its members. They sometimes claimed innocence or justified their actions in the light of the greater injustices against which they were contending. Endorse- ments and support received from other constituencies were empha- sized. In these and related ways, organizations attempt to manage their impressions and improve their credibility. However, as Ashforth and Gibbs (1990) point out, organizations that “protest too much” run the risk of undermining their legitimacy. Suchman (1995b) has described a range of strategies employed by organizations to gain, maintain, and regain their legitimacy.
One final caution: In recognizing the possibility of strategic action by organizations confronting institutional pressures, it is also important that institutional theorists not lose sight of the distinctive properties of institutions, in particular those associated with the cultural-cognitive forms. As Goodrick and Salancik (1996) point out:
A problem with the direct incorporation of a strategic choice per- spective into institutional theory is that it discounts the social-fact quality of institutions. Rather than being social facts that make up the fabric of social life, they assume the special and arbitrary posi- tions of dominant social agents. The notion that organizations act at times without choice or forethought is lost… The institutional context [then becomes] … of no special importance for understand-ing organizational action. It is simply a constraint to be managed like any other constraint, a choice among many choices. (p. 3)
Goodrick and Salancik (1996) examined the behavior of various types of California hospitals in adopting Cesarean operations from 1965 to 1995, a time when the rates for this procedure increased greatly. Professional practice norms encourage the use of Cesarean sections for high- but not low-risk births. Comparing Cesarean rates among for- profit and nonprofit hospitals, the researchers observed differences among them only for births of intermediate risk. For-profit hospitals were more likely to carry out these relatively profitable procedures under these conditions than nonprofit forms. But this self-interested, strategic behavior only occurred for intermediate-risk patient condi- tions for which professional norms did not provide clear guidelines. Institutional rules set the limits within which strategic behavior occurs. More generally, there is clear tension between a strategic approach and the view of many institutional theorists. As previewed in Chapter 3, a strategic perspective views legitimacy as another type of resource—a cultural resource—to be extracted from the environment. As Suchman (1995b: 576) points out, given the “almost limitless malleability and symbols and rituals,” in contrast to the hardness of material resources and outcomes, the former provides ready targets for manipulation by managers. Institutionalists, however, emphasize the limits of this view. In a strong and constraining symbolic environment, managers’ decisions are often constructed by the same belief systems that deter- mine audience reactions. Consequently, rather than examining the strategic legitimation efforts of specific focal organizations, many insti- tutionalists tend to emphasize the collective structuration (DiMaggio and Powell 1983) of entire fields or sectors of organizational life (Such-man 1995b: 576).
Collective Responses
More so than the actions of single organizations, concerted responses by multiple organizations have the potential to shape the nature of the demands and even to redefine the rules and logics operat- ing within the field. I review several studies dealing with these collec- tive responses to institutional environments, but reserve for Chapter 8 a discussion of more general field-level changes.
Earlier in this chapter, I discussed a number of empirical studies depicting the ways in which organizations subject to some type of nor- mative or regulative pressure respond in ways that reshape or redefine these institutional demands. Recall the behavior of personnel officers confronted by equal opportunity legislation. I suspect that such processes—in which rules or normative controls are proposed or legis- lated, interpretations and collective sense-making activities take place among participants in the field to which they are directed, and then the requirements are redefined and clarified—are more often the rule than the exception.
A study by Kaplan and Harrison (1993) examines the reactions by organizations to changes in the legal environment that exposed board members to a greater risk of liability suits. Corporations pursued both proactive strategies, adapting so as to conform to environmental requirements, and reactive strategies, attempting to alter environmen- tal demands. Both involved collective as well as individual efforts. The Business Roundtable, a voluntary governance association, “took the lead in coordinating the conformity strategy by making recommenda- tions on board composition and committee structure” consistent with the concerns raised by such regulatory bodies as the Security and Exchanges Commission (p. 423). Proactive collective strategies included lobbying efforts directed at states to broaden the indemnification pro- tection for outside directors as well as the creation of insurance consor- tia to underwrite the costs of providing director and officer liability insurance to companies. The strategies pursued were judged to be highly successful: “New legislation and the insurance consortia enabled most corporations to substantially improve director liability protection. As a result, most board members are less at risk of personal liability now than they were a decade ago” (pp. 426–427).
A somewhat more contentious process of negotiation and compro- mise is detailed by Hoffman (1997) in his historical account of reactions by the U.S. chemical and petroleum firms and industries, during the period 1960 to 1995, to increasing regulatory pressures intended to reduce treats to the natural environment. Trade journals were examined to assess industry response to these challenges. During the 1960s, indus- try media devoted relatively little attention to environmental concerns; most accusations and concerns were dismissed as groundless. However, with the formation of the Environmental Protection Agency in 1970—in response to a number of highly visible environmental accidents— governmental scrutiny of both industries increased dramatically, as did the mobilization of environmental activists. The Chemical Manufactur- ers Association and the American Petroleum Institute initially pursued primarily confrontational strategies in an attempt to influence regula- tory behavior—in particular, standard-setting—but by the late 1980s, a more cooperative framework had evolved as the industries and related corporations began to embrace a policy of corporate environmentalism. Public agencies and corporate actors accommodated to one another’s interests, erecting new types of understandings, norms, and hybrid public/private governance arrangements.
More conflict-laden collective reactions have occurred whose reso- lution has proved more difficult. Miles (1982) examined the interesting case of the response by the Big Six tobacco companies in the United States to the Surgeon General’s report linking smoking and cancer. Each of these companies reacted individually, some developing their foreign markets and others diversifying their products. But they also engaged in collective action, creating the Tobacco Industry Research Committee to conduct their own scientific studies and cooperating to hire lobbyists and create political action committees to guide legisla- tion and resist the passage of punitive laws. Collective efforts to shape the regulative and other governance structures to which they are subject continue up to the present day in response to heightened activities on the part of federal and state officials.
A different kind of negotiation process and redefinition of the orga- nization field is described by Halliday, Powell, and Granfors (1993) in their study of U.S. state bar associations These associations were formed at the turn of the 20th century as market-based organizations competing for the support of lawyer members. However, during the early decades, failure rates were high. A different model of organizing was developed in the early 1920s, which relied on state support: Membership in the association was mandated as a condition for prac- ticing in the state, and annual fees were imposed on all members. This new form, which required either legislative action or a ruling by the state supreme court, rapidly diffused through a number of states, although it did not supplant the market-based form in all states. Event- history analysis revealed that the state-based mode was more likely to be adopted in states in which the market-based form had attracted only a small proportion of lawyers (i.e., states favorably disposed to licens- ing professions) and in rural states. The state-based form was also promoted by a centralized, propagator association, the American Judi- cature Society, created to advance legal reform and diffuse the new structure. Collective action in this case resulted in the transformation of an organizational form, moving it out of the competitive market- place and under the protective wing of the state.
Source: Scott Richard (2013), Institutions and Organizations: Ideas, Interests, and Identities, SAGE Publications, Inc; Fourth edition.