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peer influence

Brayden

I unashamedly embrace the embeddedness approach. It's not that I don't believe individualistic accounts of behavior aren't useful, but I find it difficult, if not impossible, to disentangle individual calculation from the social context in which actors are embedded. This is especially true in an organizational context, where firms must be constantly aware of their competitive environment when setting strategy or making policy. How can a firm set strategy without taking into account what it's competitors are doing? If organizational actors are the ultimate examples of strategic action, then it's pretty clear that context matters to decision-making.

Along these lines, the latest issue of the Academy of Management Review has an excellent article dealing with imitation (an online copy of the paper is here). Marvin Lieberman and Shigeru Asaba bring together various approaches to firm imitation in the most comprehensive treatment of the subject I've ever seen. Moreover, they attempt to distinguish between the situations when firms imitate to reduce information uncertainty or mitigate risk from those situations when firms try to match rivals' strategic moves to maintain competitive balance. This article is a must read for any organizational scholar dealing with the economics or sociology of peer influence.

One quote from the article stood out to me.

[B]y reducing variation in firms' strategies and technological paths, imitation raises the collective risk of an industry. When firms imitate each other in an uncertain environment, they place identical bets on the future, thereby raising the odds of large positive or negative outcomes. As a result, society bears a higher risk, even though individual firms may diminish their risk of falling behind rivals (pg. 379).

Nice point. This seems evident looking at the dot-com boom or investment in fiberoptics in retrospect. Both cases involved firms taking huge risks (e.g. going public way too soon in the dot-com industry) without questioning the possible negative repercussions simply because it was becoming the standard in their respective industries.

Written by brayden king

April 26, 2006 at 3:15 pm

Posted in brayden, sociology, strategy

7 Responses

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  1. So, given that you are embedded in this blog with your co-blogger I anticipate you’ll soon change your mind about the primacy of embeddedness.

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    Teppo

    April 26, 2006 at 4:27 pm

  2. I’m with Brayden – embeddedness is critical. But, of course, imitation need not spring from embeddedness, if by that term you mean direct ties between organizations.

    Field theories suggest other mechanisms that might lead to imitation that should be mentioned – structural equivalence, cultural capital, position vis-a-vis markets, etc. To paraphrase John Levi-Martin (“What is Field Theory?“), organizations do not have to “bump into each other” to produce effects. Imitation may occur simply because it has long been established that this is the best (or only possible) way to do something.

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    Jeff

    April 26, 2006 at 5:51 pm

  3. Jeff – I meant embeddedness more generally – as in, organizations are embedded in a set of multidimensional relationships (e.g. social, competitive, roles). The article I cited above discusses a lot of those relationships, although it doesn’t delve deeply into field theory. I see no reason though that you couldn’t conceptualize rival relationships as embedded in a field. Rivals may not communicate directly, but of course they are aware of each other because of their situated positions in the market.

    Thanks for dropping in at our blog Jeff.

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    brayden

    April 26, 2006 at 5:56 pm

  4. As for Teppo – Our positions as co-bloggers is more likely to incite polarization than isomorphism.

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    brayden

    April 26, 2006 at 5:57 pm

  5. Brayden – per your last point – the critical question is why?

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    Teppo

    April 26, 2006 at 7:04 pm

  6. I see no reason though that you couldn’t conceptualize rival relationships as embedded in a field.

    In fact, this is exactly what Bourdieu has been saying all along.

    Incidentally, Raka Ray has an interesting study (Fields of Protest [1999]) of the conditions of fields that produce imitation versus differentiation. She looks at women’s advocacy organizations within local political fields (one in Bombay, one in Calcutta) and their respective strategies, frames, and structural positions within the fields. The punchline is that hegemonic fields (one dominant political org/party) produce imitation/isomorphism while fragmented fields (power dispersed among many orgs) produce differentiation.

    It would be great to see these ideas translated into the economic arena. Or have they been?

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    Jeff

    April 28, 2006 at 11:21 am

  7. That’s a good question. I’m not sure if anyone has ever made that hypothesis regarding industries.

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    brayden

    April 28, 2006 at 2:54 pm


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