orgtheory.net

let’s pick on steve postrel

Fabio

Last night, Steve Postrel, guest blogger for our evil twin blog Organizations and Markets, dropped the following comment into Omar’s discussion on the merits of population ecology and institutionalism:

“I’m not up on all the many-splendored varieties of institutional theory. But I do know the “iron cage” idea and the use of universities and colleges as the leading example. So why hasn’t Kraatz and Zajac’s paper on liberal arts schools adopting business curricula been a torpedo hit below the waterline for all this stuff? It’s as clear a falsification as you’re ever going to get with a theory this fuzzy.”

Not so fast, Steve. Let’s review the Iron Cage argument and the Zajac/Kraatz article. First, a quick review. The iron cage argument goes something like this:

Organizations in an industry exhibit the same structure not because of a common response to technical or economic problems. Instead, organizations adopt the same format because they are responding to state/quasi-state regulation, norms established by other firms, and norms enforced by professional groups.

The Meyer and Rowan argument is something like:

An organizational structure is often adopted so that managers signal acceptance of social norms to elites, who provide money and legitimacy. Once the elites are satisfied, persons inside the organization are at liberty to engage in work that might be socially sanctioned. Organizational structure sheilds these workers from such external interference.

The Zajac/Kraatz article goes something like this:

If you look at liberal arts colleges, you will notice that many of them have deviated from the standard format of pure academics to create vocational degrees. Neo-institutional theory predicts that if you deviate from the socially approved format for you organization, then the money and legitimacy stops, and the organization disbands. This does not happen for liberal arts colleges. Lots go vocational, few are disbanded.

Is this a stunning slap down of institutional theory? Answer: Only if you have an unreasonable interpretation of institutional theory. If you interpret institutional theory as: “Any deviation whatsoever from any cultural standards for an organization leads to immediate destruction,” then yes, the Zajac/Kraatz article is strong evidence against this view. But this strikes me as an absurdly strong overstatement of institutional thinking.

However, if might believe this version: “Societies have a menu of options available to organizations and if you fail to choose a structure compatible with any of these options, or the values that inform the menu, then your organization will suffer many problems.” If so, then the Zajac/Kraatz paper fits well within institutional thinking. In the case of liberal arts colleges, American society offers multiple models for academic organization.

The founders of liberal arts colleges, I am sure, would prefer to keep this model indefinitely. For example, the alumni of all women’s colleges have fought tooth and nail to prevent co-education on those campuses. At the same time, there are other legitimate models of colleges. Most of these models, such as Clark Kerr’s idea of the modern “multi-versity,” assume that it is perfectly fine to offer both liberal arts and professional degrees. Liberal arts colleges with a shrinking clientele just switched from one legitimate structure to another. Important finding? Yes. Knock down for institutionalism? Not really.

I found the Zajac/Kraatz article provocative. They correctly identified that colleges have multiple resource streams (liberal arts students and professional students) and correctly identified the conditions when college switch to professional degrees. This just shows that colleges have multiple audiences and that American higher education has many models for organization, which colleges change along with market conditions. This strikes me as rather consistent with institutional theory, especially the Meyer and Rown version.

The ball’s in your court, Steve. 

Written by fabiorojas

January 16, 2007 at 8:54 pm

3 Responses

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  1. […] do I get for my troubles? Not exactly a gauntlet to the face, but since their post has such tempting flaws, I’ll […]

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  2. I’m cross-posting this comment at O&M.

    It’s interesting the Postrel frames Kraatz and Zajac (1996) as a refutation of institutional theory. Refutation is too strong a descriptor for my taste and is not one that the authors used in their paper. If we refuted every org. theory for which we found lack of evidence in some study or another, we’d have no theories left. Rather than refute institutional theory, the findings of their study suggest some serious limitations to institutional theory. These limitations were, at least in my reading of Meyer and Rowan (1977) and DiMaggio and Powell (1983), previously acknowledged, although never sufficiently tested. Institutional isomorphism or decoupling are not processes that we should observe in every established industry or institutionalized setting. In fact, D&P are pretty clear in stating that mimetic isomorphism will most likely occur when the outcomes of organizational practices are ambiguous, difficult to measure, or uncertainty is so great that mimicking becomes a cost-effective shortcut for dealing with contingencies in the environment. Thus, in situations where organizations can clearly measure the effectiveness of a change in policy or practice, decision-makers are much more likely to ignore institutional pressures for conformity. In fact, being blindly conforming when there is mounting evidence that this is an irrational thing to do will likely lead to a loss of legitimacy! Who will see an organization as credible that knowingly violates the central premise of its organizing logic?

    Meyer and Rowan similarly argue that when efficiency criteria exist that allow outsiders to actively assess an organization’s activities, the organization is less likely to adopt practices or policies symbolically. In sum, institutional theory was meant from the beginning to be a theory about how organizations respond to their environment when uncertainty or ambiguity impedes rational assessment.

    The cleverness of the Kraatz and Zajac article is to actually take the limitations of institutional theory seriously, rather than just pretend that institutional theory can explain everything. We need more studies such as this. In a persuasive recent AMR article, for example, Lieberman and Asada suggested other limitations to standard institutional isomorphism arguments that are in need of testing. Someone needs to do it. The problem is that org. scholars are much more likely to try to push a theory past its limits than to work within them. Ezra Zuckerman wrote in a comment responding to an ASR article by Zajac (no less) and Westphal in 2004, “sociologists tend to be self-congratulatory rather than self-critical and to attack economic research without seriously engaging it…The key is to realize that [institutional or social constructionist] powers are limited in characteristic ways….the recognitions of such limits raises interesting questions that could truly advance neoinstitutional theory” (pp. 463-464). This is the real challenge for institutional theory. Only by recognizing and theorizing more precisely the limitations of institutional theory can we truly harness the predictive power that it has. But at the same time, to argue that one study flatly refutes a theory is just as wrongheaded. No theory has the power to explain everything, but institutional theorists have provided lots of evidence suggesting that institutional theory has much to say about certain kinds of organizational processes and behavior. Ignoring all of the contributions because the theory itself has some inherent limitations seems a little silly to me.

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    brayden

    January 17, 2007 at 3:36 pm

  3. What also appears silly to me is the notion that an entire theory (conceived in the Quinean manner as a large network of interconnected statements, some of we are more willing to abandon than others) can possibly be “refuted” by a single empirical test. The year is not 1922. And no, this is not Vienna. That would acting as if Quine, Lakatos, Feyerabend, Kuhn, Churchland and an entire generation (or two) of contributions to post-Popperian (and some pre-Popperian such as Duhem and Cassirer) philosophy of science did not exist.

    For a theoretical paradigm as empirically successful as institutional theory, you are going to have to do better than a single study (or two). It would rather take a giant string of disconfirmations and anomalies for anybody to even begin to consider the abandonment of the institutional worldview. That I don’t think is even close to happening at the moment. More like “incremental” fixes and reconsiderations but no large-scale overhaul in the near future.

    One point of the Zuckerman piece that Brayden mentions was precisely the related attitude of some economic sociologists to begin dancing around shouting to any one who can hear that their latest study just “refuted” neoclassical economic theory. I think we should just junk the “r” word. It is not useful, it is not how (any) science works.

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    Omar

    January 17, 2007 at 7:07 pm


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