Tied by Institutionalization: A Formal Theory and Evidence

Tied by Institutionalization: A Formal Theory and Evidence

By Min Lui, László Pólos, Michael T. Hannan
September 6,2019Working Paper No. 3819

This paper deals with a central challenge in organizational sociology: to predict adaptive capabilities in changing environments. We address theoretical and methodological gaps in existing research. First, whereas researchers have long acknowledged that the evolution of adaptive capabilities is driven by forces both within an organization and at the producer-market interface, extant studies have largely focused on the internal dynamics. Our paper proposes a model of how ties between an organization and its external audiences curtail adaptive capabilities as market tenure increases. This process reflects the institutionalization of engagement practices and declining transferability of resources across activities as an organization ages. Our model complements existing studies and contributes to a more complete understanding of adaptive capabilities. Second, in spite of the clear consensus that both the content of change (i.e., what has been changed) and the process of change (i.e., frequency, sequence or rhythm of changes) ought to be measured when studying organizational adaptation, we lack a unified and generalizable measure for this fundamental concept. Following the recent socio-cognitive turn in organizational sociology, we propose a novel approach that sees adaptation as change in an organization’s position in a cognitive space, and we suggest a (psychological)-distance-based measure that commensurates both the content and frequency of adaptation. We present an analysis of the UK motorcycle market as an empirical illustration for our theoretical prediction and proposed measure.