Stephen J. Mezias

An Institutional Model of Organizational Practice: Financial Reporting at the Fortune 200.

This paper is based on work from my dissertation; I owe special thanks to Jim March, the chairman, and reading committee members, Jeff Pfeffer and Don Palmer. Earlier versions of this paper were presented at the Complex Organizations Seminar, sponsored by the Institute for Social and Policy Studies at Yale University; I owe many thanks to the participants at these workshops. I want to thank Theresa Lant, Dick Scott, and Frances Milliken for comments on earlier versions. The advice, guidance, and careful reading of Paul DiMaggio has contributed considerably to improving this paper on several occasions. In addition, the comments of five anonymous reviewers resulted in a much better paper; I thank them wholeheartedly. The helpful editorship of Marshall Meyer is acknowledged gratefully. As is customary, I take full responsibility for remaining errors, ambiguities, and problems. This paper compares applied economic models and an institutional model in an empirical study of financial reporting practice at the Fortune 200 between 1962 and 1984. The findings indicate that the institutional model adds significant explanatory power over and above the models that currently dominate the applied economics literature. Thus, the primacy of organizational level rationality implicit in existing models is shown to be overly narrow and inadequate. In discussing the conclusions of the study and their implication for future research, particular emphasis is placed on the question of how institutional environments change over time.-

Aspiration-Level Adaptation in an American Financial Services Organization: A Field Study

Using field data from an American financial services organization, we examined the effects of three important variables in Cyert and Marchs (1963) initial conceptualization of the aspiration-level adaptation process: The previous aspiration level, performance feedback, and social comparison. Past findings obtained in controlled contexts (Glynn et al. 1991; Lant 1992) have provided empirical support for the attainment discrepancy model (Lewin et al. 1944), which includes variables of the previous aspiration level and attainment discrepancy (i.e., performance feedback). We replicated these findings in the field: The effects of the previous aspiration level and attainment discrepancy on the current aspiration levels were significant and positive. In addition, we investigated the effect of social comparison using a variable based on the difference between the performance of the focal unit and the performance of comparable others (Greve 1998). Based on the assumption that decision makers in organizations will expect to observe similar performance levels among those in the same comparison group (Wood 1989), we posited that the effect of social comparison would be negative, refiecting managerial efforts to reduce performance discrepancies among similar units. The empirical results supported the prediction from this reasoning. We conclude by discussing implications of our findings for theory and research in organizational learning and the behavioral theory of the firm.

The community dynamics of entrepreneurship: The birth of the american film industry, 1895-1929

The study of entrepreneurship has traditionally focused on the founders of new organizations, especially those that emerge as leaders in the creation of new industries. Much of this work follows what Gartner (1989) called the ‘traits’ approach. Studies of this type posit a causal link between the founding and success of new organizations and the personal attributes of the entrepreneurs. However, more recent research has documented the many ways in which successful entrepreneurship requires more than just the ‘right’ person; a multitude of factors, operating at both the organizational and evironmental levels of analysis, also affect the success of entrepreneurial efforts. Examples include technological change (Shane, 1996), changes in sources of firm capital (Cable and Shane, 1997), changes in strategic alliances (Eisenhardt and Schoonhoven, 1996), personal networks (Ostgaard and Birley, 1996), national environments (Shane and Kolvereid, 1995), location choice (Stearns, Carter, Reynolds, and Williams, 1995), and national culture (Shane, 1992).

Mimetic Learning and the Evolution of Organizational Populations

The ecological (Hannan and Freeman, 1977) and institutional (Meyer and Rowan, 1977) perspectives have emerged as two dominant but distinct paradigms in organizational theory since their inceptions over a decade ago. Initially, one reason why these theories may have seemed irreconcilable, at least superficially, was the difference in the research questions that the original authors posed. Hannan and Freeman (1977) pointed to an apparent diversity of organizational forms and offered an ecological explanation for this multitude. Meyer and Rowan (1977) and especially DiMaggio and Powell (1983) stressed the lack of diversity of forms and proposed the mechanism of institutional isomorphism by which this diversity is eliminated. More recent work concerning populations of organizations has recognized the similarity of the inter organizational field (DiMaggio and Powell, 1983; Meyer and Scott, 1983) and the population (Hannan and Freeman, 1977; 1984; McKelvey and Aldrich, 1983) as units of analysis. For example, both institutional and ecological perspectives have been used in explaining the evolution of a population of Voluntary Social Service Organizations in the greater Toronto area (Singh, House, and Tucker, 1986; Singh, Tucker, and House, 1986; Singh, Tucker, and Meinhard, 1988; Tucker, Singh, and Meinhard, 1990).

National cultural distance as liability of foreignness: the issue of level of analysis

In this study, we focus on the use of measures of national cultural distance as a proxy for liabilities of foreignness. In particular, we focus on the dominant measure of national cultural distance: a linear combination of the differences between the two countries where the workplaces are located using indices from previously published research. Our question concerns whether measures of distance based on previously published indices at the national level are appropriate measures of cultural distance at the organizational level. Our results suggest that they are not; implications for theory and research are discussed.

Blind Trust: Market Control, Legal Environments, and the Dynamics of Competitive Intensity in the Early American Film Industry, 1893–1920

This study of the emergence of the film industry in the U.S. between 1893 and 1920 contributes to the growing literature linking legal environments and population dynamics. This was an era characterized by a shift to active anti-trust policy, which manifested itself in legal action to disband a trust that had dominated the industry, the Motion Pictures Patents Corporation (MPPC). We use archival data to show that mortality was reduced by trust membership and increased with the market share of the trust members. The effects of litigation are varied, with litigation filed by trust members enhancing mortality and litigation filed against trust members decreasing mortality. Analysis of coded headlines from media reports on the emerging industry shows that a shift in the view of the trust in the normative environment toward a more negative view was also associated with decreased mortality. Results also show that learning and the compensatory fitness enjoyed before anti-trust law was enforced prevented the MPPC members from recognizing changes in the marketplace; as a result, they were less likely to move from making short films to making increasingly popular feature-length films.

Financial meltdown as normal accident: The case of the American savings and loan industry

Abstract This essay examines the recent financial disaster involving savings and loan institutions in the United States. The model of normal accidents, which attributes organizational disasters to the intersection of tight coupling and complexity, is used to illuminate aspects of the crisis. The neo-institutional perspective, stressing the role of three organized actors: the accounting profession, the state, and the organizations themselves, is used to understand why complexity and tight coupling increased simultaneously.

Country level corruption as a liability of foreignness: effects on staffing, incentives, and activities

Past research examining country-level corruption found that corruption reduces foreign direct investment. However, this research lacks implications for multinational corporations considering operating in high corruption countries. Recent international research has examined subsidiary challenges beyond initial investment decisions, but has not addressed operational challenges posed by corruption. Research investigating country-level corruption as a liability of foreignness (LOF) is needed because this theoretical perspective specifically examines mechanisms for managing and controlling subsidiaries. This paper utilizes the LOF perspective, integrating learning, international human resource management, and agency theories, to understand how corruption affects subsidiary adaptation strategies.

Creating attention and favorability during the emergence of new industries: The case of film in America, 1894–1927

Despite the importance of the processes by which legitimacy barriers to the emergence of new industries are overcome, direct study of them has been largely absent from the literature. We develop and test a model of how capacities for social action are created and deployed to overcome cultural barriers to new industries. Specifically, we argue that the experience that firms gain in field-relevant activity as well as the development and concentration of ties among those firms generate capacities to overcome the barriers of cognitive and sociopolitical legitimacy. We support this argument empirically by linking measures of these factors with attention to and favorability assessments of the new industry.

Chapter 21 Situated learning and brokerage as keys to successful knowledge production: An experiential review

We both arrived at Stanford in September 1982 to begin the Ph.D. program at the Graduate School of Business (GSB). The beginning was not auspicious; it rained heavily during orientation, an unusual event in itself, but a fitting precursor to one of the worst El Niňos on record. By February of our first winter in California, there was one period in which it rained 60 of the prior 63 days. The cold and the wet did not dampen our curiosity or that of our cohort, however, as we began the required Organizational Behavior class with GSB Professor James March in January 1983. We emerged from the shock of the first semester of graduate school into a course that powerfully underscored the interdisciplinary nature of the doctoral program at the GSB. Because the syllabus actively engaged the literature of rational choice in making the case for behavioral perspectives, students from all disciplines were drawn into the discussion. We learned more about rational choice in the many discussions that ensued in this cross-disciplinary climate than in our graduate economics classes. More importantly, we learned through experience that the individual mind is not an adequate level of analysis to understand the dynamics of the organizations community at Stanford in the early 1980s. Only in retrospect, though, can we appreciate fully the uniqueness of that time and place, and the resulting impact of scholarship that emerged from this context. For this reason, our discussion will emphasize a situated learning perspective to comprehend the Stanford phenomenon. The resulting de-emphasis of the individual mind as the focal repository of knowledge and emphasis on interactions among actors and sources of embedded knowledge is not intended to slight the role of incredibly intelligent individuals and the stellar intellects that surrounded us. Rather, we adopt a situated perspective because it provides a mechanism for traversing the large Stanford community and its multiple levels of analysis without resorting to aggregation, dominant coalitions, or anthropomorphized learning units. Although we will confine our examples of activities and dynamics to the community at the GSB that we knew best, we also believe that other communities of practice were similar to varying degrees. The importance of these other communities will be implicit in our discussion of the role of bridges linking these dense networks of situated learning.