THE IRON CAGE REVISITED: INSTITUTIONAL ISOMORPHISM AND COLLECTIVE RATIONALITY IN ORGANIZATIONAL FIELDS DiMaggio and Powell, 1983
Introduction 1.
“The Iron Cage” was a term initially used by Weber to describe bureaucratic control of life in a capitalist society.
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Weber saw it as a powerful system that controlled people in society (at work or not)
Weber argued that bureaucratization is caused by:
Competition among firms (most salient)
Competition among states
Increasing need to control staff and citizens (by those in power)
Middle class demands for equal protection under the law
DiMaggio and Powel argue that bureaucratization is caused by:
Processes that make organizations more similar (but not more efficient)
“Structuration of organizational fields”
Organizational fields are “a recognized area of institutional life” (e.g. suppliers, regulatory agencies, and organizations that produce similar products)
Structuration is “the process of institutional definition”
How do organizations start becoming so similar? 1.
Initially, new organizational fields start out fairly diverse
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Once a field is established, there is a push toward homogeneity. homogeneity. For example:
Textbooks used to be produced in dozens of ways – now there are two
Legal education used to have many forms – now there are only two
At some point, legitimacy becomes more important than efficiency to organizations
“A threshold is reached beyond which adoption [i.e. copying other organizations and competitors] provides legitimacy rather than improves performance”
Normative practices (regardless of efficiency) increase the the likelihood of adoption. Organizations end up trying to be alike, even if it costs them.
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At first, organizations are only responsive to some kind of need, but eventually they start responding to other organizations and the environment
Early civil service reforms were related to a government need, but later they were related to institutional definitions of what a legitimate government agency looks like
Eventually, larger organizations can dominate & control their environment (rather than responding to it)
Isomorphism 1.
The term that describes this homogenization is called “isomorphism”
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The environment makes organizations isomorphic
Organizational characteristics are modified to increase compatibility with the environment
The number of organizations in a population depends on how many the t he environment can support
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The diversity of organizational forms depends on environmental diversity
Two types of isomorphism: Competitive and Institutional
Competitive – more relevant for fields where there is free fr ee and open competition
Institutional – useful took for understanding the politics and ceremony in organizational life
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Organizations compete for resources and customers – but they also compete for legitimacy, political power, and social fitness
Mechanisms of of Institutional Isomorphic Change Change (2 of 3) 3) 1.
Coercive Isomorphism – Homogeneity Homogeneity stems from political influence and desire for legitimacy. Specifically, it results results from:
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Formal and informal pressures from other organizations
Cultural expectations
Government mandates (pollution control, tax laws)
A common legal environment
Reporting Requirements
Home office / Subsidiary structure and pressure
Mimetic Isomorphism – Homogeneity stems from similar responses to uncertainty. Specifically, it results from:
Not knowing what to do in an ambiguous environment with shifting goals, new technology, and complex environmental demands – so copying other organizations seems to be an easy way out of this complexity
“Modeling” – happens through turnover, consulting firms, trade organizations
Japan sent a task force to study other governments in the late 1800s
Americans returned the favor by trying to copy Japanese business processes
Mechanisms of Institutional Isomorphic change (Continued) 1.
Normative Pressures - Stem primarily from professionalization
Professionalization is another form of legitimization
Professions provide a conduit conduit for information and homogeneou homogeneous s norms to flow through informal networks and formal gatherings (e.g. trade organizations)
Hiring people from similar college backgrounds creates a pool of individuals with similar norms and experiences
“Filtering” – hiring from firms in the same industry, recruiting staff from a narrow range of institutions, common promotion practices in the field
On-the-job socialization will filter out any non-normative thoughts / ideas
Common career paths regardless of wherever you go ( e.g. assistant, associate, full professor)
Competition for employees forces organizations to make themselves look more prestigious (e.g. “attracting physicians...who attract patients” is part of a hospital’s goal)
Predictors of Isomorphic Change: Organizational-Level 1.
Hyp: The more dependence that one organization has on another, the more similar it will become to that organization.
Coercive pressures (slide 5) are built into exchange relationships Suppliers who can customize themselves to their cli ents’ structure and individual needs can prevent potential future competitors from entering
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Hyp: The greater the centralization of resource supply, the more an organization will change to resemble the organizations it is dependent upon
The stronger party can coerce the weaker party to adopt i ts practices in order to accommodate the stronger party’s needs
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Hyp: More uncertainty leads to increased copying of successful organizations
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Hyp: More goal ambiguity leads to increased copying of successful organizations
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Some argue that copying organizations eliminates competitive advantages. However, D&P believe that it creates more legitimacy which is more important for survival.
Hyp: More managerial participation in trade trade organizations leads to more homogeneity with other organizations in the field
Predictors of Isomorphic Change: Field-Level 1.
Hyp: Greater dependence upon fewer sources of resources
Greater
isomorphism.
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Organizations deal with the same pressures from the same resource suppliers
Hyp: Greater interaction with the state
Greater isomorphism
Industry standards for an entire field will homogenize the field
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Hyp: The fewer alternative models in a field
Faster isomorphism in the field
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Hyp: More ambiguous and uncertain technologies and goals
faster
isopmorphic change in the field 3.
Hyp: More professionalism professionalis m in the field
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Measured by the universality of credential requirements, robustness of graduate t raining
Hyp: More structuration of a field
More isomorphism
More isomorphism
Fields with stable, acknowledged boundaries and status orders will be more homogeneous homogeneou s because interaction of organizations in the field is greater
Critique / Discussion (Brief – Full questions are in the packet) 1.
To what extent can consultants and people who work in related companies (e.g. Coke & Pepsi employees) really spread information? There are legal, ethical, and practical hurdles.
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I think (but do not know for certain) that there have to be a number of exceptions to their theory. For example, IDEO, IDEO, Google, and other organizations seem to maintain a unique structure and set of business processes. Search engines have been around for over a decade and design firms have been around for a century. So, how are they doing this?
Critique / Discussion (1 of 2) 1.
Consulting firms are implicated as one mechanism behind isomorphic change. As a consultant for 4 years to 8 clients, I haven't ever seen clients say “I want x because my competitor has it” – just for the sake of being similar. When I worked at a client who wanted a new system to activate customers’ wireless handsets faster, it was a logical response to competition – not a quest for legitimacy. Also, there are serious roadblocks to information diffusion from 1 client to the next (legally and ethically). ethically). Most clients usually don’t know the specifics of what their competitors are really doing internally (even with “competitive intelligence” departments), and consultants certainly can’t tell them. So, what are some true examples of how homogenizing information spreads (aside from public company reports)? Does it really spread or is homogenization much more a result of adapting to the environment and competition? I don’t see how trade shows and informal social networks of people in the same industry help diffuse uniform business practices. Trade shows are intended for visibility and marketing. And, I question the extent to which people at separate companies within the same industry would really talk about their employer’s business practices.
Critique / Discussion 2. An organization like Google is extremely unique, successful, and legitimate. It does not seem to have succumbed to isomorphism that is described here, though internet search firms have been around for a decade or so. Google hires trained professionals (from similar backgrounds). It is working in an uncertain environment (globally), and it exists with a lot of ambiguity since it is a first-mover in virtually everything it does. So, what has allowed Google to be simultaneously unique and very successful successful (and legitimate)? For example, is the lack of internet legislation (p. 150) responsible in any way? Is Google still too new to be affected by normative homogenization processes? Is 10+ years years not long enough to create industry norms? (Additionally, IDEO would be another example of an organization that doesn’t seem to have succumbed to these pressures but has been around even longer.) Perhaps they are are both unique enough that there is no real "field" to pressure them?
