Organizational Institutionalism Chapter 26

1. Organizational InstitutionalismChapter 26 Institutional-level Learning: Learning as a Source of Institutional Change

2. Authors • Pamela Haunschild • Ph.D. from Carnegie Mellon, 1992 • Prior postings: Stanford, UW-Madison • Currently Chair of Management at UT-Austin • Interested in: Org behavior, org design, org change • David Chandler • Ph.D. candidate at UT-Austin • Under research interests, he has a quote: “Economics is all about how people make choices; sociology is all about how they don’t have any choices to make.” – Dusenberry 1960 • He is interested in ethics, CSR, and stakeholder theory

3. Economic Benefit vs. Institutional Pressures • Past theories tend to assume companies adopt new practices for one of two reasons: • Economic benefit: early adoption of new cost-saving or sales-promoting techniques lead companies to change the way they do things • Institutional pressure: the threat of losing legitimacy compels companies to “follow the crowd” regardless of the efficiency or cost concerns related • Organizational Learning theorists suggest these are too exclusive

4. Organizational Learning • This chapter tries to bridge past theories to show how organizations can adopt practices later but still do so for economic benefit • Wal-Mart Example

5. Definitions of Organizational Learning • Huber 1991: • “An entity learns if, through its processing of information, the range of its potential behaviors is changed.” • Levitt and March 1988: • Organizations are “seen as learning by encoding inferences from history into routines that guide behavior.”

6. Organizational Learning • Huber’s Four constructs • Knowledge acquisition • Information distribution • Information interpretation • Organizational memory • Keys from both definitions: • Routines are independent of individual actors • They change based on interpretations of past • They change as new experiences accumulate • Learning and change are intertwined

7. Levels of Analysis • Past research has examined individual, group, and organizational levels, but little has examined field-level learning • Institutional theory has started to incorporate other levels – change driven from below – while learning literature has considered more field-level learning – change driven from above • The chapter focuses on learning that speaks to the field/institutional level

8. Processes of Change • Inertia has limited change to path-dependent processes • Neo-institutionalists suggest change occurs in punctuated leaps, rather than over time • Learning theorists suggest it occurs slowly over time through experience and adaptation • The institutional and learning literatures have begun to overlap by acknowledging institutional learning and individual actor agency

9. Institutional Theory and Change • Neoinstitutionalists have begun to consider that 1) institutions can change and 2) consider the conditions under which it occurs • Institutionalization is a process that includes emergence, diffusion, change, deinstitutionalization, and the emergence of new institutions

10. Institutional Change • The evolving area of institutional change has created doubt about the permanence of institutions, and therefore created the possibility of deinstitutionalizaation • This concept gave rise to the notion that institutions require reinforcement to survive

11. Sources of Institutional Change • Exogenous sources of change • Influence of institutional and technical forces in the environment • Incomplete institutionalization • Shocks that alter the firm’s environment • Endogenous sources of change • Individual actors • Forces of interest, agency, and institutional entrepreneurship

12. Institutional Level Learning • Six key areas within learning theory: • The role of unintended consequences • The role of learning processes and field-level change • The role of search: exploration vs. exploitation • The role of forgetting (unlearning, disadoption, and deinstitutionalization) • The roles of selective and inferential learning • The role of heterogeneity vs. homogeneity

13. The Role of Unintended Consequences • Unplanned institutional change caused by deliberate action • Example: the importance of performance measures to manager pay leads to a focus on measurement improvement over actual improvement • What does this concept suggest about institutional theory? • Institutions might not automatically reproduce themselves • Intended action is not the only source of change

14. The Role of Learning Processes and Field-level Change • Organizations exhibit evidence of having learned routines and practices, both from other firms and within the general population • Example: firms may learn from firms with which they share a connection such industry associations • What are the implications for Institutional Theory from this concept? • Previously unaccounted for contextual factors may play an important role in the spread of institutional practices • Example: imperfectly imitating Toyota

15. The Role of Search:Exploration vs. Exploitation • Exploration: search directed toward new knowledge and competencies • Tends to produce more dramatic and varied change • Examples: HIV/AIDS treatment, green movement • Often related to higher risk without guarantees of higher reward • Exploitation: search directed toward better utilization of existing competencies • More common • Faster feedback, better short-term results

16. The Role of Forgetting • Unlearning • Disadoption • Deinstitutionalization

17. The Roles of Selective and Inferential Learning • Firms may adopt practices later and cherry-pick the best practices rather than go through the difficulties of first movers • Contradicts present theory that suggests firms adopt practices regardless of economic performance to maintain legitimacy • Example: adopting green technologies only after benefits were exhibited by earlier entrants • Fields can learn from other fields • Example: Korean firms adopting Japanese and U.S. practices in the semiconductor industry

18. The Roles of Heterogeneity vs. Homogeneity • Different strategic responses can lead to greater heterogeneity within a field • Three field level conditions that can lead to heterogeneous responses: • Imperfect copying • Regulatory pressures • Competition

19. Big Questions • Why do organizations exist? • Why do some organizations survive and others don’t? • How and why do organizations differ? • How and why do organizations change? • What are the emerging issues?