Institutional Theory
Organizations are said to be limited in their strategic actions by external constraints and institutional pressures toward conformity (
Oliver, 1991) which may be particularly salient in the domain of CSR (
Bansal, 2005;
Campbell, 2007). The institutional argument centers on the idea that there are enduring institutions in social life that effect the thoughts, feelings, and behaviors of individuals and collective actors (
Lawrence & Suddaby, 2006). These institutions consist of the “cognitive, normative, and regulative structures and activities that provide stability and meaning to social behavior” (
Scott, 1995) which therefore affect the strategic, legal, and ethical norms inherent in decisions of CSR. Due to mimetic, coercive, or normative isomorphic pressures to conform to taken-for-granted social rules, firms will tend to imitate the behavior of other firms in order to gain or maintain legitimacy and increase their chances for survival (
DiMaggio & Powell, 1983).
Legitimacy seeking is therefore a central concept in institutional theory and is defined as what is “appropriate within some socially constructed system of norms, values and beliefs” (
Suchman, 1995). With regard to the adoption of CSR practices, particularly salient is the notion of moral legitimacy which rests on judgments about whether an activity should or ought to be pursued (
Suchman, 1995). Here, one could argue that regulatory, normative, and cognitive institutional pressures constrain a firm’s ability to pursue strategies that might deviate from the norms of the industry lest the firm risks harming its legitimacy (
Boiral, 2007). Yet, as the norms of the industry change, from a narrow shareholder perspective to a broader stakeholder perspective, adopting positive CSR practices becomes more appropriate and maintaining harmful social or environmental practices becomes less acceptable (
Chuang, Church, & Ophir, 2011;
Shropshire & Hillman, 2007;
Yeung, Lo, & Cheng, 2011).
Rivoli and Waddock (2011) suggest that on the whole, over time, the ambiguity and uncertainty surrounding a social or environmental issue subsides and activities that would have once been considered “unheard of” (e.g., extended supply chain responsibility), become normalized, expected and even required by organizations while other issues (e.g. bribery, child labor) become increasingly stigmatized.
In parallel, laws, regulations, and other structural characteristics of the industry will impose coercive isomorphic pressures on the firm to comply with accepted standards (
DiMaggio & Powell, 1983). With increased legal and other institutional forces in the domain of CSR, acceptable standards in this field are evolving (
Chuang et al., 2011;
Haack, Schoeneborn, & Wickert, 2012;
Waddock, 2008). In turbulent or uncertain environments in particular, mimetic isomorphic pressures will further push firms to copy the actions of successful organizations within their field. Several qualitative case studies have demonstrated that organizations will tend to adopt practices similar to one another over time in order to maintain legitimacy within their institutional field (
Bansal, 2005;
Boiral, 2007;
Hoffman, 1999). For example, in a study of firms in the oil and gas, mining, and forestry industries in Canada,
Bansal (2005) found that institutional mimicry (e.g., conducting an environmental audit in response to industry norms) was positively associated with corporate sustainable development over time. Empirically, the widespread diffusion of ISO 9000 standards and the adoption of same-sex partner health benefits have also been found to be the result of coercive, normative, and mimetic isomorphic pressures (
Chuang et al., 2011;
Yeung et al., 2011).
The increase in institutional drivers around CSR has been well documented (
Waddock, 2008) such that firms today appear to face a greater degree of pressure to comply to mounting CSR demands (
Waddock et al., 2002). These growing isomorphic pressures constrain firm behavior so that organizations comply with accepted standards (legal or normative) and adopt positive CSR initiatives and halt harmful practices. This represents for many organizations a strategic change. By strategic change, we mean “a difference in the form, quality, or state over time in an organization’s alignment with its external environment” that involves significant changes in resource deployments (
Rajagopalan & Spreitzer, 1997, p. 49). Strategic change is an important construct in strategy research and fundamental to discussions of firm performance in so far as adapting to environmental changes is seen as a necessary condition of firm survival (
Porter, 1980). In the context of today’s hypercompetitive dynamic contexts, ensuring continual fit between strategy and environment becomes even more critical to competitive advantage. With institutional pressures to take a broader stakeholder impact perspective, many companies are facing strategic change with regard to corporate social, environmental, and other stakeholder-related issues.
Although this evolution may be very slow, especially around highly contested areas such as same-sex partner employee benefits (
Chuang et al., 2011) and environmental responsibility (
Hoffman, 1999), on the whole, we would expect that both the overall levels of CSR initiatives as well as the rate at which firms adopt CSR initiatives should be increasing over time (
Bansal, 2005). First, the pressures on firms to address or redress negative externalities have grown over the last two decades (
Waddock et al., 2002); these have ranged from issues regarding exploitative labor practices in the early 1990s to ethical collapses at major corporations such as Enron, WorldCom, and Tyco in the early 2000s; from increased calls for environmental responsibility post Al Gore’s
An Inconvenient Truth (2006) to the most recent progress on formal legislative equality for same-sex couples. As such, the sheer breadth of social, environmental, and other stakeholder issues that now face organizations is of a magnitude unforeseen even a decade ago (
Paine, 2003).
With the increased transparency that has accompanied the Internet boom, the strength of stakeholder group pressure on firms to adopt good and limit bad CSR practices has also increased during the same time frame (
Waddock et al., 2002). For example, the sheer number of emerging global standards, codes, and principles (e.g., the United Nations Global Compact, ISO 14000, and Fair Labour Guidelines) has created an expectation of corporate accountability and transparency in social, environment, and other stakeholder issue reporting, strengthening the normative pressures on all firms to comply to better operational practices and reduce negative externalities (
Waddock, 2008;
Waddock et al., 2002;
Yeung et al., 2011).
This increased access to information and increased pressure from employees, suppliers, NGOs, communities, and governments, to be more socially responsible, has progressed such that a new set of social, environmental, and ethical rules has come to...