Heterogeneity of isomorphic pressures: intertwining the resource-based view and the neoinstitutional approach.

AutorPopadiuk, Silvio
CargoReport

Introduction

The purpose of our paper is to present the foundations of organizational analysis' neoinstitutionalism (Nee, 2005), highlighting the concepts of legitimacy and isomorphism, as combined with elements of the resource-based view to support the idea of sustained organizational strategy. Based on Lippman and Rumelt (1982) and Barney (1991), an organization possesses a competitive advantage when it implements a value-creating strategy not implemented by current or potential competitors; additionally, an organization maintains a sustained competitive advantage when such competitive advantage continues to exist after efforts to duplicate that advantage have ceased.

Economic theory argues that, in the absence of market imperfections, abnormal economic rents will be diluted as rivals and new entrants join the industry. Resource-based view, the dominant paradigm in strategic research, advances in the sense that organizations can obtain sustained abnormal returns if they own superior resources and are protected by mechanisms that prevent their diffusion throughout the industry. Hence, the concept of competitive advantage can be related directly to the notion of profits in excess of the opportunity cost of capital, and a persistently higher rate of return than competitors. An organization holds a sustained competitive advantage when the value creating strategy is not implemented by current or potential competitors and its benefits cannot be duplicated by others (Barney, 1986, 1991; Hamel & Prahalad, 1994; Lippman & Rumelt, 1982; Penrose, 1959; Peteraf, 1993; Rumelt, 1984; Wernerfelt, 1984).

On the other hand, neoinstitutionalism aims to develop a sociological view of institutions. This theory describes the way they interact and how they affect society. It provides a manner for observing institutions outside traditional economic views by explaining why so many businesses end up having similar organizational structures in spite of evolving in different ways. Meyer and Rowan (1977) and DiMaggio and Powell (1991) examine that organizations incorporate socially-rationalized procedures to achieve legitimacy, regardless of the effectiveness of those practices. Nonetheless, while neoinstitutionalism explains organizations' survival through continuous adoption of legitimized structures, it has failed to specify how competitive advantage in the form of abnormal returns can be obtained by an organization.

The association of the resource-based view and neoinstitutional theory is developed in this work as a means to establish the potential of a new explanation towards organizational diversity and the existence of organizations that are more capable of generating and maintaining (or maximizing) value than others. The similarities of organizations in the institutional field only provide the baseline for organizational performance. Thus, it would be from this underlying level that organizations would be need to differentiate themselves and generate sustainable competitive advantage through active and selective response to different institutional pressures.

There are several explanations for organizational heterogeneity in the different theoretical approaches on organizations (Table 1). All have their basis in the systemic movement. The design of organizations as open systems considers organizations and their external environments as parts of a larger system that interacts continuously. The organization exchanges resources with the environment, ensuring its survival, and changes to adapt to environmental contingencies that give access to these resources.

This investigation follows a research tradition focused on the conversation of organizational institutionalism with other economic approaches in the analysis of organizational practices and strategies (e.g., Beckert, 2010a; Conney, 2007; Delbridge & Edwards, 2013; Feldman & Pentland, 2003; Holmes, Miller, Hitt, & Salmador, 2013; Queiroz, Vasconcelos, & Goldszmidt, 2007). Beckert (2010a) offers a discussion of the interrelationships between Economic Sociology's networks (Granovetter, 1985) and institutional and cognitive levels and their role in the change of market fields. Conney's (2007) work, based on Giddens' (1984) Structuration Theory and on the theoretical support of the New Institutional Economics (North, 1992), sought to analyze the process of institutionalization from an agency perspective. Delbridge and Edwards (2013) applied critical realism (Azevedo, 2002) to better understand the interdependencies between actions, contexts and institutional logics. Feldman and Pentland (2003) used Giddens' and Bourdie's contributions to propose a reviewed ontology of Evolutionary Economics' organizational routine construct (Nelson & Winter, 1982) based on the interaction between its performative (concerning the agency) and ostensive (relating to institutional structure) dimensions. Holmes, Miller, Hitt and Salmador (2013) examined the effects of informal and formal institutions on countries' inward foreign direct investment. The conclusions suggest that a country's informal institutions shape its formal institutions, which in turn, affect foreign managers' cognitive frames, which seek to invest in countries with institutional environments that allow their firms to leverage specific advantages. Seeking to assess legitimacy and strategic resource, Queiroz, Vasconcelos and Goldszmidt (2007) observed that institutional entrepreneurship involves ambiguity and contradiction and, although it aims for differentiation, involves isomorphism.

This investigation is able to aggregate relevant contribution through the purpose of a theoretical model that steadily articulates meaningful elements from the resource based view and neoinstitutionalism for this understanding. Even though isomorphism is a fundamental concept in the construction of the proposed model, its focus lies on explaining the heterogeneity of isomorphic pressures. Thus, we present the fundamentals of neoinstitutionalism, comprising concepts of legitimacy and isomorphism, to compose a perspective of the institutional environment complementing the original explanation of the resource-based view, to lay the foundations of sustainable organizational strategy.

Along these lines, this work reassesses the idea of analyzing the organization as a passive actor driven by environmental changes, by identifying its sharing of the process. Two fundamental advances are proposed: (a) organizations that have the ability to define rationalized myths of their organizational fields have increased competitive advantage; (b) development of a relevant conversation between neoinstitutionalism and resource-based theory, rather than just having the latter subsumed into the former, suggesting the prospect of raising the resource-based theory to the societal and organizational field levels. Therefore, this investigation revises and provides an alternative notion of institutional isomorphism as well as the exploration of the theme regarding organizational responses. Hence, this investigation is aligned with contemporary theoretical issues, given, particularly, the growing interest in exploring possible points of convergence among the institutional, cognitive and agency levels (Beckert, 2010a, 2010b; Campbell, 2004; Streeck & Thellen, 2005).

As these sociologic and economic approaches are conjugated, epistemological issues arise. The sociological basis of neoinstitutionalism embodies a duality of institutional structure and agency (Berger & Luckman, 1967). The first embodies the typification of habitual actions, values and rules sustained by a social group (institutional structure) while the second consists of its member's actual actions at specific times, in specific places (agency). The resource based view goes beyond an analytical character and does not abandon the agency prescriptive focus on the economic organizational relationship, adopting formalistic and timeless elements. Concerning the delimitation of this theoretical research, the approach undertaken is centered on the agency and its relation with the institutional level, adopting a primarily analytical focus, as it explains why certain organizations are more successful than others when selecting an array of resources for competing in a market.

Resource-based View Framework: The Idiosyncratic Employment of Resources

Penrose (1959), Wernerfelt (1984), Barney (1986, 1991) and Peteraf (1993) are widely known in strategy literature. The resource-based view characterizes the dominant paradigm in organizational strategy where resources are key performance-determinants. Important concepts from Penrose (1959) include organizational analysis as a collection of resources; the optimization in the growth path of a particular organization, combining internal and external resources; the process of organizational growth depends on characteristics concerning management as well as their experience and ability to learn. Penrose (1959) examines that the services that a given set of resources provides will be different depending on their idiosyncratic implementation. Thus, intra-industry heterogeneity due to creative resources employment generates differences and opportunities in financial performance.

Barney (1986, 1991) defines resources as tangible and intangible assets that firms control and can use for strategy conception and implementation. According to Wernerfelt (1984) resources can be seen as a strength or weakness of a particular organization. Organizational resources are classified into three categories: physical capital resources, such as greenfields and equipment, geographic location, capital and access to raw materials; human capital resources, such as training, experience, judgmental capacity, intelligence, social relationships and managers' and employees' insights; organizational capital resources, including infrastructure, capabilities, organizational processes, decision-making and...

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