Summary Organizational Theory

Lecture 4 Organizations

Planning:

The organizations-environmental relationships:

• Contingency theory (complexity and rate of change)
• Resource dependence theory
• Institutional theory
• Population ecology theory
• Behavioural theory of firm

Organization learning, change, and identity

Resource dependency theory (Pfeffer & Salancik, 1978) - “The external control of Organization – a resource dependence perspective”

1. All organizations critically depend on external resources (raw materials, labour, capital, equipment, knowledge, networks and customers)
2. When resources dependence involves multiple organizations, the dependence is often mutual/reciprocal (Drees & Heugens, 2013)
3. Resource dependence is highest when criticality and scarcity are highest
4. Goal: secure organizational autonomy and legitimacy to create and maintain competitive advantage.
5. Through inter-organizational arrangements

• Board Interlock → a person serves on one or more boards, not necessarily         connected the board. “Interlocking directorate refers to the practice of members of a corporate board of directors serving on the boards of multiple corporations.”
• Post modernists criticize board interlock because it creates an elite in the sector, where         all information is controlled by a few. There is a discussion whether there is a cartel or         collusion, PM things it is, whilst the modernist see it as a way of maintaining security         and smooth organization.
• *multiple organizations or stakeholders -> always the case for resources dependency theory
• Alliance (agreement): “An alliance is a relationship among people, groups, or states that have joined together for mutual benefit or to achieve some common purpose, whether or not explicit agreement has been worked out among them.” No new business is created but they share the profit made, they have an agreement but no new project or company is created.  For example McDonalds and Oreo or airlines.
• Joint Venture (multiple owners) → a new business is created by two already existing organizations. The organizations are still separate but have created a business together. An example might be Jaguar and Land Rover. Another example is Sony Ericson where two businesses with qualities come together to produce a product.
• In-sourcing to secure and decrease the level of dependency you migt decide to insource for example cleaning service.
• Merger (one owner) & acquisition (parent subsidiaries) for example AirFrance and KLM merger into one organization with one HQ and one owner. These might have different services and branding but they are the same organization.

1. Resource dependence will lead to inter organizational arrangements that will lead to organizational autonomy (mediating) & legitimacy (not mediating) and thus lead to organizational performance (but only if there is an organisational autonomy).

Old x New Institutionalism

Old

• Coined by Selznick (1967) stating that to institutionalise is to infuse ‘with value beyond the technical requirements of the task at hand
• Expandability (readiness/adaptability to new circumstances or demand from both internal or external)
• Organizational level
• Singular organization
• Active actors

New

• Socialized by Meyer and Rowan (1977) and DiMaggio and Powell (1983) introducing the notions of field, pressures and isomorphism
• Legitimacy (license to operate) instead of organizational survival
• Field and organisational levels
• Plural organizations
• Passive and active actors

• Institution: more or less taken for granted repetitive social behaviour supported by normative systems and cognitive understandings that give meaning to social exchange and thus enable self-reproducing social order (Greenwood et al., 2008)
• Institutional field: those organization that in the aggregate constitute a recognised area of institutional life: key supplies, resource and product consumer, regulatory agencies and other organization that produce similar services or product (DiMaggio & Powel, 1983)

New institutionalism: adoption/diffusion

• Institutional pressures

• Coercive pressures (resource dependence, state influence)
• Normative pressure (networks, credentials)
• Mimetic pressures (trait-based (AH), frequency-based, outcome-based imitation (Hello Fresh, AH copies this system/idea)  
• Isomorphism (institutional): similarity in form or shape
• Findings from Hedges & Lander (2009)
• Institutional pressures (coercive, normative and mimetic pressures) lead to institutional isomorphism (taken for granted). This isomorphism will then lead to symbolic (people judging you for not following) and substantive (numerical, accounting-based) performance
• Another finding from Heugens & Lander (2009): as the institutional pressures are weak at best, there is some space for active agency to change old institutions or create a new one.
• Decoupling: loosening the connection between organizational symbolic façade and organisation back-stage technical work processes.
• Benefit of decoupling: gain legitimacy by appearing accountable while simultaneously maintaining internal flexibility through efficient ceremonial (instead of substantive) inspections.

New Institutionalism: Institutional Entrepreneurship/Work

• IE: “Activities of actors who an interest in particular institutional arrangements and who leverage resources to create new institutions or to transform existing ones.” (Maguire, Hard & Lawrence, 2004)
• IW: “The purpose action of individual and organization aimed at creating, maintaining and disrupting institutions.” (Lawrence & Suddaby, 2006)

New Intuitionalism: Institutional Complexity/Logics

• IC: A condition in which multiple institutional logics are incompatible causing a wide array of organization problems including paralysis and demise. (Greenwood et al., 2010)
• IL: Deeply held socio cultural prescriptions and proscriptions that enables and constrains actions cognition and action in their social environment.
• Incapability is implicitly assumed (Thronton et al., 2012)
• If it is explicitly it is almost always exemplified by an over conflict between two camps (e.g. business logic vs. sustainability logic)
• But actors in the same organization can have difference perceptions about logic incapability instantiated in structures and practices (Peifer, 2014)