Juan Almandoz

Founding Teams as Carriers of Competing Logics When Institutional Forces Predict Banks’ Risk Exposure

Through archival data from 225 local banks founded between 2006 and 2009, as well as interviews with 73 bank founders, this paper explores the influence of founders’ institutional logics, specifically financial and community logics, on the degree of risk taking in the organizations they found. Local bank founders steeped in a financial logic see the bank as an investment vehicle and seek to maximize profits, while those motivated by a community logic are driven to meet community needs and focus less on profits. Despite demands from regulators and consultants that promote uniformity of operations, variation exists in banks’ risk strategies that seems connected to values and taken-for-granted predispositions inherent in such institutional logics. But such a connection is empirically demonstrated only in banks with larger founding teams. In those, increased internal representation of a financial logic is associated with higher use of risky deposit instruments to finance rapid asset growth, while a higher representation of a community logic is associated with lower use of such risky instruments. Furthering research on hybrid organizations that combine competing logics, this paper suggests that individuals are more likely to be the carriers of institutional influences especially when operating collectively in larger teams, in which one expects more group conformity and diffusion of responsibility. In smaller teams, individual discretion is more likely to dominate institutional forces.

The Rise of Socially Responsible Investment Funds: The Paradoxical Role of the Financial Logic:

Socially responsible investing (SRI) is gaining traction in the financial sector, but it is unclear whether the dominant financial logic complements or competes with the social logic in the founding of SRI funds. Based on insights we gained from observation at an Asian SRI industry association, interviews with SRI professionals in the U.S. and Europe, and other fieldwork, we questioned explanations for SRI’s conflicted relationship with the financial logic. Our observations prompted us to build a panel database of SRI fund foundings from 1970 to 2014 in 19 countries so that we could examine how a dominant logic interacts with alternative logics to promote or stifle institutional change. We decomposed the financial logic into interdependent dimensions as the provider of means (resources, practices, and knowledge) for novel financial ventures to be founded and the enforcer of profit-maximizing ends that constrain such foundings. Our theory suggests a paradoxical role for the financial logic, which explains an intriguing empirical finding: the founding of SRI funds has a curvilinear, inverted-U-shaped relationship with the prevalence of the financial logic. We propose and find that the relationship between the dominant financial logic and the social logic of SRI shifts from complementary to competing as the financial logic becomes more prevalent in society and its profit-maximizing end becomes taken for granted. We examined how certain alternative logics—those of unions, religion, and green political parties—moderate these effects. Our results shed light on how and to what extent institutional change can occur in fields in which one institutional logic is dominant. They also reveal country-level institutional factors that drive SRI.

Different Shades of Green: Environment Uncertainty and the Strategies of Hybrid Organizations

Abstract How does environmental uncertainty affect the process of starting new hybrid organizations? Our comparative analysis of the formation of two “green” banks – with hybrid goals linked to banking and environmental logics – reveals that shifts in their strategic orientations resulted from attempts to align uncertain and changing resource environments with the composition and goals of the organizations’ top leadership. While the initial idea and goals of the founders were similar, the organizations they established ended up with divergent strategic orientations and senior leadership groups.

Explaining the Loss of Community: Competing Logics and Institutional Change in the U.S. Banking Industry

This chapter examines the transition in the US banking industry from a community to a national logic, developing a general model to explain how and when shifts in institutional logics occur. Based on qualitative historical evidence and discrete-time event history analysis predicting the introduction of legislation favoring the national logic, this chapter proposes that dramatic exogenous events such as the Great Depression or more gradual processes such as modernization favored the industrys transition to the national logic, but that such exogenous events had a greater influence in areas where strategic actors could capitalize on them. The qualitative evidence presented here suggests that struggles involving organizational identity and “legitimacy politics” played an important role in the shift in logics. Our theorizing focuses on how, when the environment changes in an incremental fashion, actors are primed with new possibilities, which may shift their collective identities, but when environmental changes are discontinuous, they provide actors strategic opportunities to alter the balance of logics in the environment.