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A Tale of Two Cities: Competing Logics and Practice Variation In the Professionalizing of Mutual Funds

Michael Lounsbury1•
University of Alberta1
03 May 2011-Social Science Research Network-
TL;DR: In this article, the authors examine practice diffusion in an environment where competing logics exist, focusing on how organizational and practice variations are institutionally shaped, and how trustee and performance logics in the mutual fund industry that were rooted in different geographic locations (Boston and New York) led to variation in how mutual funds established contracts with independent professional money management firms.
Abstract: This paper examines practice diffusion in an environment where competing logics exist, focusing on how organizational and practice variations are institutionally shaped. Empirically, I study how trustee and performance logics in the mutual fund industry that were rooted in different geographic locations (Boston and New York) led to variation in how mutual funds established contracts with independent professional money management firms. This focus on competing logics redirects institutional research away from isomorphism and the segregation of institutional and technical forces, and towards an appreciation of how multiple forms of rationality provide a foundation for ongoing struggle and change in organizational fields. Implications for the dominant two-stage institutional model of diffusion as well as research on institutions, organizations, and professions are discussed.
Citations
More filters
The iron cage revisited: Institutional isomorphism and collective rationality in organizational fields (Chinese Translation)

[...]

Paul DiMaggio, Walter W. Powell
01 Jan 2008
TL;DR: In this article, the authors argue that rational actors make their organizations increasingly similar as they try to change them, and describe three isomorphic processes-coercive, mimetic, and normative.
Abstract: 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.

2,134 citations

Journal Article•DOI•
Institutional Complexity and Organizational Responses

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Royston Greenwood1, Mia Raynard1, Farah Kodeih2, E. Micelotta1, Michael Lounsbury1 •
University of Alberta1, ESSEC Business School2
26 Jul 2011-The Academy of Management Annals
TL;DR: In this paper, the authors draw on a variety of cognate literatures to discuss the field-level structural characteristics and organizational attributes that shape institutional complexity and explore the repertoire of strategies and structures that organizations deploy to cope with multiple, competing demands.
Abstract: Organizations face institutional complexity whenever they confront incompatible prescriptions from multiple institutional logics. Our interest is in how plural institutional logics, refracted through field-level structures and processes, are experienced within organizations and how organizations respond to such complexity. We draw on a variety of cognate literatures to discuss the field-level structural characteristics and organizational attributes that shape institutional complexity. We then explore the repertoire of strategies and structures that organizations deploy to cope with multiple, competing demands. The analytical framework developed herein is presented to guide future scholarship in the systematic analysis of institutional complexity. We conclude by suggesting avenues for future research.

2,129 citations

Cites background from "A Tale of Two Cities: Competing Log..."

  • ...  Marquis & Lounsbury, 2007     Meyer & Hammerschmid, 2006   † Field † 1994 – 2002 † Banking sector in U.S.   † Individual † 2003 † Public sector in Austria   Quantitative analysis Competing logics facilitate resistance to institutional change by stimulating new forms of professional…...

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  • ...…more than two—play out within organizational fields (e.g., Binder, 2007; Delbridge & Edwards, 2008; Dunn & Jones, 2010; Kitchener, 2002; Lok, 2010; Lounsbury, 2007; Marquis & Lounsbury, 2007; Pache & Santos, 2010; Purdy & Gray, 2009; Reay & Hinings, 2009; Scott, Ruef, Mendel, & Caronna, 2000)....

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  • ...…and compete.1Marquis and Lounsbury (2007) connect fundamental and competing logics of the state to alternative logics in the U.S. banking sector; furthermore, in an interesting elaboration, they show how field-level logics become rooted in geographical communities (see also Lounsbury, 2007)....

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  • ...…et al.’s (2010) studies, although they depict a more complex scenario where multiple inherently contradictory logics coexist and compete.1Marquis and Lounsbury (2007) connect fundamental and competing logics of the state to alternative logics in the U.S. banking sector; furthermore, in an…...

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  • ...Similarly, Lounsbury (2007) found that relative stability in the mutual fund industry was achieved by a geographic dispersion of competing logics—whereby the professional trustee logic persisted in one geographic location and the market performance logic in another....

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Journal Article•DOI•
Building sustainable hybrid organizations: the case of commercial microfinance organizations

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Julie Battilana1, Silvia Dorado2•
Harvard University1, University of Rhode Island2
01 Dec 2010-Academy of Management Journal
TL;DR: In this paper, the authors explore how new types of hybrid organizations (organizations that combine institutional logics in unprecedented ways) can develop and maintain their hybrid nature in the absence of a ready-to-w...
Abstract: We explore how new types of hybrid organizations (organizations that combine institutional logics in unprecedented ways) can develop and maintain their hybrid nature in the absence of a “ready-to-w...

2,113 citations

Cites background from "A Tale of Two Cities: Competing Log..."

  • ...These studies have contributed to explaining variance in organizational practices within and across organizational fields (Lounsbury, 2007)....

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  • ...Research has also shown that multiple institutional logics often co-exist within organizational fields (e.g., Reay & Hinings, 2005; Marquis & Lounsbury, 2007), and that these multiple logics might impose different, and potentially conflicting, demands on organizations (D‟Aunno, Sutton, & Price,…...

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Book•
The Institutional Logics Perspective: A New Approach to Culture, Structure and Process

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Patricia H. Thornton1, Patricia H. Thornton2, William Ocasio, Michael Lounsbury3•
Duke University1, Stanford University2, University of Alberta3
16 Feb 2012
TL;DR: In this paper, the authors introduce the Institutional Logics Perspective and define the Inter-institutional System (IIS) as "the emergence, stability and change of the IIS system".
Abstract: 1. Introduction to the Institutional Logics Perspective 2. Precursors to the Institutional Logics Perspective 3. Defining the Inter-institutional System 4. The Emergence, Stability and Change of the Inter-institutional System 5. Micro-Foundations of Institutional Logics 6. The Dynamics of Organizational Practices and Identities 7. The Emergence and Evolution of Field-Level Logics 8. Implications for Future Research

1,983 citations

Cites background from "A Tale of Two Cities: Competing Log..."

  • ...…mutual fund industry from passive investment trusteeship to speculative portfolio growth based on the professionally-credentialed theory of risk-management (lounsbury, 2007; lounsbury and crumley, 2007), they argue that practice variation is particularly important in accounting for…...

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Journal Article•DOI•
Inside the Hybrid Organization: Selective Coupling as a Response to Competing Institutional Logics

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Anne-Claire Pache1, Filipe Santos2•
ESSEC Business School1, INSEAD2
01 Aug 2013-Academy of Management Journal
TL;DR: In this article, the authors explore how hybrid organizations, which incorporate competing institutional logics, internally manage the logics that they embody, and identify a specific hybridization pattern that they refer to as "Trojan horse", whereby organizations that entered the work integration field with low legitimacy because of their embeddedness in the commercial logic strategically incorporated elements from the social welfare logic in an attempt to gain legitimacy and acceptance.
Abstract: This article explores how hybrid organizations, which incorporate competing institutional logics, internally manage the logics that they embody. Relying on an inductive comparative case study of four work integration social enterprises embedded in competing social welfare and commercial logics, we show that, instead of adopting strategies of decoupling or compromising, as the literature typically suggests, these organizations selectively coupled intact elements prescribed by each logic. This strategy allowed them to project legitimacy to external stakeholders without having to engage in costly deceptions or negotiations. We further identify a specific hybridization pattern that we refer to as "Trojan horse," whereby organizations that entered the work integration field with low legitimacy because of their embeddedness in the commercial logic strategically incorporated elements from the social welfare logic in an attempt to gain legitimacy and acceptance. Surprisingly, they did so more than comparable organizations originating from the social welfare logic. These findings suggest that, when lacking legitimacy in a given field, hybrids may manipulate the templates provided by the multiple logics in which they are embedded in an attempt to gain acceptance. Overall, our findings contribute to a better understanding of how organizations can survive and thrive when embedded in pluralistic institutional environments. [ABSTRACT FROM AUTHOR]

1,546 citations

Cites background from "A Tale of Two Cities: Competing Log..."

  • ...In these complex environments, organizations are exposed over lengthy periods of time to multiple institutional logics that prescribe what constitutes legitimate behavior and provide taken-for-granted conceptions of what goals are appropriate and what means are legitimate to achieve these goals (Lounsbury, 2007b; Thornton & Ocasio, 2008)....

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  • ...…are exposed over lengthy periods of time to multiple institutional logics that prescribe what constitutes legitimate behavior and provide taken-for-granted conceptions of what goals are appropriate and what means are legitimate to achieve these goals (Lounsbury, 2007b; Thornton & Ocasio, 2008)....

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  • ...…models of action creates opportunities for hybrid organizations to draw from the broader repertoire of behaviors prescribed by competing logics (Battilana & Dorado, 2010; Binder, 2007; Greenwood, Diaz, Li, & Lorente, 2010; Greenwood et al., 2011; Lounsbury, 2007a; Reay & Hinings, 2009)....

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References
More filters
Book Chapter•DOI•
The iron cage revisited institutional isomorphism and collective rationality in organizational fields

[...]

Paul DiMaggio, Walter W. Powell
01 Apr 1983-American Sociological Review
TL;DR: In this paper, the authors argue that rational actors make their organizations increasingly similar as they try to change them, and describe three isomorphic processes-coercive, mimetic, and normative.
Abstract: 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.

32,981 citations

Journal Article•DOI•
Efficient capital markets: a review of theory and empirical work*

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Eugene F. Fama
01 May 1970-Journal of Finance
TL;DR: Efficient Capital Markets: A Review of Theory and Empirical Work Author(s): Eugene Fama Source: The Journal of Finance, Vol. 25, No. 2, Papers and Proceedings of the Twenty-Eighth Annual Meeting of the American Finance Association New York, N.Y. December, 28-30, 1969 (May, 1970), pp. 383-417 as mentioned in this paper
Abstract: Efficient Capital Markets: A Review of Theory and Empirical Work Author(s): Eugene F. Fama Source: The Journal of Finance, Vol. 25, No. 2, Papers and Proceedings of the Twenty-Eighth Annual Meeting of the American Finance Association New York, N.Y. December, 28-30, 1969 (May, 1970), pp. 383-417 Published by: Blackwell Publishing for the American Finance Association Stable URL: http://www.jstor.org/stable/2325486 Accessed: 30/03/2010 21:28

18,295 citations

"A Tale of Two Cities: Competing Log..." refers background in this paper

  • ...…by the rise of efficiency market theorists in financial economics who challenged performanceoriented funds by claiming that no investor (including a mutual fund) has much chance, beyond luck, of consistently outguessing all other market participants (e.g., Fama, 1970; Jensen, 1965; Malkiel, 1973)....

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  • ...This renewal of the trustee logic was partly supported by the rise of efficiency market theorists in financial economics who challenged performanceoriented funds by claiming that no investor (including a mutual fund) has much chance, beyond luck, of consistently outguessing all other market participants (e.g., Fama, 1970; Jensen, 1965; Malkiel, 1973)....

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Journal Article•DOI•
The Economic Institutions of Capitalism

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William M. Dugger
01 Mar 1987-Journal of Economic Issues
TL;DR: The Economic Institutions of Capitalism as mentioned in this paper is a seminal work in the field of economic institutions of capitalism. Journal of Economic Issues: Vol. 21, No. 1, pp. 528-530.
Abstract: (1987). The Economic Institutions of Capitalism. Journal of Economic Issues: Vol. 21, No. 1, pp. 528-530.

16,767 citations

Book•
A Behavioral Theory of the Firm

[...]

Richard M. Cyert, James G. March
01 Jan 1963
TL;DR: In this paper, the authors present an overview of basic concepts in the Behavioral Theory of the Firm, and present a specific price and output model for a specific type of products. But they do not discuss the relationship between the two concepts.
Abstract: List of Tables and Figures. Acknowledgements. Preface to Second Edition. 1. Introduction. 2. Antecedents of the Behavioral Theory of the Firm. 3. Organizational Goals. 4. Organizational Expectations. 5. Organizational Choice. 6. A Specific Price and Output Model. 7. A Summary of Basic Concepts in the Behavioral Theory of the Firm. 8. Some Implications. 9. An Epilogue. Index.

8,897 citations

Book•
Institutions and Organizations

[...]

W. Richard Scott
22 May 1995
TL;DR: Early Institutionalists Constructed an Analytic Framework I Three Pillars of Institutions Constructing an Analytical Framework II Content, Agency, Carriers and Levels Institutional Construction, Maintenance and Diffusion Institutional Processes Affecting Societal Systems, Organizational Fields, and Organizational Populations Institutional processes Affecting Organizational Structure and Performance Institutional Change Looking Back, Looking Forward
Abstract: Introduction Early Institutionalists Institutional Theory and Organizations Constructing an Analytic Framework I Three Pillars of Institutions Constructing an Analytic Framework II Content, Agency, Carriers and Levels Institutional Construction, Maintenance and Diffusion Institutional Processes Affecting Societal Systems, Organizational Fields, and Organizational Populations Institutional Processes Affecting Organizational Structure and Performance Institutional Change Looking Back, Looking Forward

8,382 citations

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The Iron Cage Revisited: Institutional Isomorphism and Collective Rationality in Organizational Fields

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