MGMT 861MGMT 861Class 13Class 13

(Environment: Resource (Environment: Resource Dependency, Uncertainty, Dependency, Uncertainty,

Institutional Theory)Institutional Theory)

The chapter focuses on the environment and two broad questions:

1. What are the boundaries on organizations?2. How to organizations deal with the power relationships

with their exchange partners?

The first question can be addressed with Transaction Cost Economics.

The second question can be addressed with Resource Dependency Theory.

SCOTT & DAVIS, CHAPTER 9SCOTT & DAVIS, CHAPTER 9

ORGANIZATIONAL BOUNDARIES - Can look at the markets that are served by organizations and the value chains that organizations work within.

Then, TCE can be applied relatively easily. Contracts and how uncertainty is dealt with are issues of interest here.

Should organizations make or buy products (production costs) become a variable of interest.

M-form vs. U-form – profit centers or distinct departments

Employment relations and human assets are critical.

SCOTT & DAVIS, CHAPTER 9SCOTT & DAVIS, CHAPTER 9

MANAGING RELATIONS WITH OTHER ORGS – How organizations influence their environments.

Resource dependencies are important to look at. By examining interdependencies one can assess the relative power and influence an organization has or must deal with.

Co-optation, alliances, mergers, acquisitions are all important factors – especially when one considers horizontal and vertical integration decisions.

Collective actions with professional associations and working with the state are important factors to consider.

SCOTT & DAVIS, CHAPTER 9SCOTT & DAVIS, CHAPTER 9

This chapter is a bit of a mixed bag. From an ecological perspective (open system), orgs and winning org forms are selected out by the environment.

There is some discussion abut entrepreneurship and the creation of new orgs, as well as new org populations (aggregates of orgs that are similar in some way).

Many orgs become imprinted and cannot change form over time. Their initial features remain in tact over time.

New populations emerge rapidly while existing populations make incremental changes.

SCOTT & DAVIS, CHAPTER 10SCOTT & DAVIS, CHAPTER 10

We will talk about some of the key ideas from population ecology in coming weeks, but the importance of things like niche-width (specialists vs. generalists) and density dependence tell us something about organization structures.

There are questions about the usefulness of ecological perspectives. Analyses are often done post hoc and firm failures are often not distinguished from mergers.

Institutional theory recognizes that orgs influence many aspects of their environment. Orgs operate within cultural-cognitive systems.

SCOTT & DAVIS, CHAPTER 10SCOTT & DAVIS, CHAPTER 10

From the institutional perspective, orgs are socially constructed entities. Meyer and Rowan refer to them as “rationalized myths.” Rational from their rules, but myths because they are artificial, socially constructed realities.

Institutional systems are made up of the org as well as various agents and fields within which the org operates.

Example of institutional agents include governments and professions.

Org fields are organizational populations and their supporting and constraining partners.

SCOTT & DAVIS, CHAPTER 10SCOTT & DAVIS, CHAPTER 10

Identify, summarize, and define the major types of power. Org Behavior related discussion, but it has implications for Weber, Marx, subunit power, interdependencies, etc. Authors are particularly interested in:

Psychological Change – changes in behavior, opinions, attitudes, goals, needs, values and all other aspects of a person’s state over time.

Social Influence – influence of a person/group (O) on another person (P). Discuss the social power O has over P (O/P), which is the maximum potential ability of O to influence P.

FRENCH & RAVEN (1959)FRENCH & RAVEN (1959)

BASES OF POWER:

1. Reward Power – influence as a result of reward inducement.

2. Coercive Power – punishment for non-conformance3. Legitimate Power – from internalized values in P which

dictate that O is legitimate and P has an obligation to accept O.

4. Referrent Power – Identification of P with O, feeling of oneness, closeness, or desire for such with O.

5. Expert Power – based on knowledge (e.g., attorney)

Think macro-level (between subunits and companies).

FRENCH & RAVEN (1959)FRENCH & RAVEN (1959)

Described in great detail and with great examples how the interdependencies and interrelationships between organizations affect decision-making and behavior.

Discuss COMPLIANCE, the loss of discretion, as a result of demands and influences by external groups/orgs. Organizations fight against compliance.

To avoid social control and compliance, can avoid influence altogether or can balance demands of outside forces.

PFEFFER & SALANCIK (1978)PFEFFER & SALANCIK (1978)

Methods to avoid compliance:

1. Control communication channels to organization.2. Control the definition of satisfaction w/organization.3. Control the formation of demands through

professionalization and self-regulation, standard setting and regulatory policy, and advertising and merchandising.

4. Also manage observability/visibility.

PFEFFER & SALANCIK (1978)PFEFFER & SALANCIK (1978)

They talk about how orgs can manage and avoid dependence. For example, the organization can adapt to environment or alter the environment to fit the org’s capabilities.

They can work to avoid resource dependencies by pursuing multiple suppliers and substitutes for inputs.

Avoiding control – finding multiple outlets for a product/service (i.e. don’t rely on just one large client)

Fits w/Porter’s 5 Forces Model of Competition.

PFEFFER & SALANCIK (1978)PFEFFER & SALANCIK (1978)

Man and his behavior and actions are greatly affected by environment and social processes.

We do not have the biological makeup of other mammals that tells us how to act.

We behave according to a socially constructed reality.

Habitualized actions (frequently repeated actions) provide much needed direction and narrows choices.

Institutionalization develops with reciprocal habitualization over time.

BERGER & LUCKMANN (1967)BERGER & LUCKMANN (1967)

Institutions control human conduct by setting up patterns of conduct which channel actions in a desired way.

There are multiple institutions (paternity, organizations, society) that all exist and sometimes compete with each other, but which usually “hang together.”

Institutional world becomes an objective reality, which sometimes requires legitimation (ways that it can be explained and justified).

Language is huge part of process – passes knowledge.

BERGER & LUCKMANN (1967)BERGER & LUCKMANN (1967)

Roles – institutionalization involves both the typification of specific actions and forms of actions (actors are expected to perform actions in a specific manner, i.e., judges, professors, etc.)

All institutionalized conduct involves roles which share in controlling conduct (compliance with socially defined roles is enforced).

Scope of institutionalization depends on the generality of relevance structures. Institutionalization can be shared by groups within society, but not by society as a whole.

BERGER & LUCKMANN (1967)BERGER & LUCKMANN (1967)

The paper is a discussion of institutional isomorphism. The authors take the view that organizations tend to be homogeneous and they discuss why.

Two types of isomorphism: competitive and institutional.

Under the conditions of free and open competition, it is not surprising that “best practices” (my quote, not their’s) emerge and they become industry standards – including structures.

However, the authors explain institutional isomorphic processes – this is their contribution.

DIMAGGIO & POWELL (1983)DIMAGGIO & POWELL (1983)

Institutional Isomorphism is divided into three categories:

1. Coercive isomorphism – formal/informal pressures are exerted by outside organizations (e.g., regulations imposed by government, larger organizations)

2. Mimetic processes – when there is high uncertainty and an organization does not know what to do, it will look to other organizations.

3. Normative pressures – Professionalization (i.e., licensing bodies, professional organizations) which encourage filtering of personnel.

DIMAGGIO & POWELL (1983)DIMAGGIO & POWELL (1983)

The authors develop 11 hypotheses (untested in the paper) that predict isomorphic change. Five are organizational-level predictors and six are field-level predictors.

They point out that there is an ideological battle between those who view elites as controlling social systems of organizations and natural-selection scholars who argue that environment drives organizational systems.

Their view is a “middle ground” (my quote). They don’t discount pop ecologists or Marxists, but they believe that neither allows for a complete analysis of why organizations tend to become isomorphic.

DIMAGGIO & POWELL (1983)DIMAGGIO & POWELL (1983)