What makes organizations so similar? We contend that the engine of rationalization and bureaucratization has moved from the competitive marketplace to the state and the professions. Once a set of organizations emerges as a field, a paradox arises: rational actors make their organizations increasingly similar as they try to change them. We describe three isomorphic processes-coercive, mimetic, and normative—leading to this outcome. We then specify hypotheses about the impact of resource centralization and dependency, goal ambiguity and technical uncertainty, and professionalization and structuration on isomorphic change. Finally, we suggest implications for theories of organizations and social change.

The iron cage revisited: Institutional isomorphism and collective rationality in organizational fields (Chinese Translation)

Annual review of environment and resources

The organizational literature on emerging industries has emphasized the need for institutional entrepreneurs - actors who give the new activity legitimacy and determine its patterns of behaviour. However, little empirical research has been carried out on the strategies that institutional entrepreneurs employ in order to achieve legitimacy for their activity. In this article, we suggest that an institutional entrepreneur can use the development of measurement tools as a strategy to develop its own legitimacy and power. By looking at a French entrepreneurial company’s development of tools to measure corporate social performance, we analyse how measurement tools influence the legitimacy of an industry and the systemic power within it. Finally, we discuss the implications of our findings for research into measurement tools in the areas of management or business and society.

Measuring the unmeasured: An institutional entrepreneur strategy in an emerging industry

Raters of firms play an important role in assessing domains ranging from sustainability to corporate governance to best places to work. Managers, investors, and scholars increasingly rely on these ratings to make strategic decisions, invest trillions of dollars in capital and study corporate social responsibility (CSR), guided by the implicit assumption that the ratings are valid. The authors document the surprising lack of agreement across social ratings from six well-established raters. These differences remain even when we adjust for explicit differences in the definition of CSR held by different raters, implying the ratings have low validity. The authors' results suggest that users of social ratings should exercise caution in interpreting their connection to actual CSR and that raters should conduct regular evaluations of their ratings.

Do Ratings of Firms Converge? Implications for Managers, Investors and Strategy Researchers

Fintech and SMEs sustainable business models: reflections and considerations for a circular economy

While a growing number of firms are being evaluated on environment, social and governance (ESG) criteria by sustainability rating agencies (SRAs), comparatively little is known about companies’ responses. Drawing on semi-structured interviews with companies operating in Italy, the present paper seeks to narrow this gap in current understanding by examining how firms react to ESG ratings, and the factors influencing their response. Unique to the literature, we show that firms may react very differently to being rated, with our analysis yielding a fourfold typology of corporate responses. The typology captures conformity and resistance to ratings across two dimensions of firm behaviour. We furthermore show that corporate responses depend on managers’ beliefs regarding the material benefits of adjusting to and scoring well on ESG ratings and their alignment with corporate strategy. In doing so, we challenge the idea that organisational ratings homogenise organisations and draw attention to the agency underlying corporate responses. Our findings also contribute to debates about the impact of ESG ratings, calling into question claims about their positive influence on companies’ sustainability performance. We conclude by discussing the wider empirical, theoretical and ethical implications of our paper.

How do companies respond to environmental, social and governance (ESG) ratings? Evidence from Italy

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Ester Clementino

Papers

How do companies respond to environmental, social and governance (ESG) ratings? Evidence from Italy

How Do Companies Respond to Environmental, Social and Governance (ESG) ratings? Evidence from Italy